A paper published by Fidessa, entitled Counter (party) intuitive, examines how the counterparty landscape has changed for buy-sides and what they can do to ease the burden it now presents.
A good credit rating used to be enough to establish a counterparty’s fitness as a trading partner, notes Fidessa. Counterparties were managed via simple ‘do not trade’ lists delivered to traders at the start of the day and traders honoured these by hand or using basic software and homegrown tools.
But times have changed, comments author Steven Strange, and regulators now expect firms to aggregate their counterparty exposure across asset classes, and include a wide range of additional holdings where the counterparty is in any way affiliated. Clients are more demanding too, as everyone attempts to mitigate risk in an ever-nervous market, he adds.
The paper explores how some forward-thinking firms have begun to meet this challenge head on and integrate compliance capabilities within front- and middle-office real-time trading workflows to better manage risk. A copy is available on the Fidessa website.