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Margin Call volumes “ain’t what they used to be”

 

This is the 3rd issue in our #TheNewNormal series, where my colleagues and I provide some insights and opinions on how the market has changed for AcadiaSoft since the start of the COVID-19 pandemic.

With apologies to CFTC Chairman Heath Tarbert’s recent op-ed in The Wall Street Journal titled “Volatility ain’t what it used to be,” in this blog we tweaked the title to focus on the margin call volumes that AcadiaSoft has experienced over the last few months and provide a look through the data to see how the system (and users) fared in peak periods of stress.

In times past, large increases in volumes like those experienced above might have conjured up images of back-office teams working late into the night to process the volumes before the next trading day.

However, in the chart below, which depicts the average time between when a margin call was sent and when collateral was pledged against the call (i.e. finished), we can see that despite the increase in call volumes, the average call completion time was only slightly elevated from pre-volatility levels.

But what of the dispute rates you ask? Surely dispute rates had to spike? It’s possible that dispute rates for email-based margin calls not processed on AcadiaSoft spiked, but the data on AcadiaSoft showed that dispute rates actually DECLINED slightly for the same period.

In summary, despite record margin call volumes, call completion times rose slightly and dispute rates decreased slightly. That’s an incredible improvement over past periods of extreme market volatility.

If your firm’s middle and back office has been logging long hours during this recent crisis, please consider joining our AcadiaSoft community through our margin workflow working group. We put post-trade automation to great use every day and we are constantly thinking about the future and how we can help create, as ISDA notes in its mission statement, “safe and efficient” markets.

We also continue to host our working groups, collaborative sessions that bring industry practitioners together to discuss common issues.

Now more than ever, we want to stay in touch. Visit AcadiaSoft’s website to join one of our sessions here.

 

About Mark Demo

Mark D. Demo is Head of Industry & Strategy at AcadiaSoft. Mark has more than 20 years’ experience in the OTC Derivatives market and has served as a co-chair of the ISDA Collateral Steering Committee. He has participated on ISDA working groups and has been involved in developing changes in collateral operations associated with financial regulations under Dodd Frank and EMIR. Mark is a collateral subject matter expert who is now overseeing AcadiaSoft’s robust working group, client and prospect engagement programs. Mark also oversees AcadiaSoft’s interactions with global regulators.

 

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