Calypso Technology, a leader in Capital Markets software, today announces it will be releasing a new solution for calculating the Initial Margin required on noncleared derivatives trades. The solution meets the requirements of the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) for margin requirements on non-centrally cleared derivatives.

Since the global financial crisis, Calypso has been the innovative leader in developing solutions for OTC derivatives central clearing and collateral management for all capital market participants including clearing houses, banks, clearing brokers and derivatives end-users. For the non-cleared market, Calypso will offer a new Margin Calculation Module to provide a margin calculation capability that meets both CFTC and ESMA requirements, as well as the ISDA SIMM (Standard Initial Margin Model) Methodology.

The new solution will be available to existing Calypso customers as an additional module, and firms that are not Calypso customers will be able to access a cloud-based Utility Service. Users of the utility solution will simply send in trades through a secure web service and receive back the Initial Margin calculation results. Calypso offers 3 margin calculation models:

  • BCBS / IOSCO Model using cross product VaR based margin calculator
  • BCBS / IOSCO Schedule (does not require regulatory approval)
  • ISDA SIMM methodology

Under the globally mandated BCBS/IOSCO standards published to reduce risks associated with over-the-counter (OTC) derivatives, all financial firms that engage in non-centrally cleared derivatives will have to exchange initial and variation margin commensurate with the counterparty risks arising from such transactions. The requirement will be phased in several stages with the first deadline in December 2015 affecting only the largest derivatives firms with over $3tn or €3tn of gross notional value. Calypso has several existing customers that will be in the first phase and it is for these firms that the solution has been developed.

“We are particularly excited to bring the same risk margin framework that is already deployed at leading clearing houses and adapt the models to meet the requirements for non-cleared derivatives. Users can draw confidence from the fact that this new service is built on the same proven scalable industry standard solution,” states David Little, Managing Director of Business Development at Calypso.

Calypso will be among the first in the market with such a service, responding to client demand for a viable solution ahead of the first deadline. The BCBS/IOSCO regulations require that each customer of the service obtain separate regulatory approval for the margin model in each jurisdiction in which it is used. “Calypso is ready to help in obtaining the necessary approvals and we believe that there is sufficient time to meet the December deadline, but we can’t know how long regulatory approval will take in all the jurisdictions so early action is advised,” states Mr. Little.