The Next Operational Hurdle for Hedge Funds — Collateral Management (KPMG)

April 2013

KEYWORDS: buy-side firm, CCP, central clearing, central counterparties, collateral, Department of the Treasury, Dodd-Frank Act, electronic trading, EMIR, European Commission, FCM, FINRA, global financial crisis, Hedge Fund Regulation, hedge funds, ISDA, margin, margining, market efficiency, operational risk, OTC derivatives, portfolios, prime broker, rehypothecation, risk management, segregation, swaps data repository

  • KPMG


The consequences of the market collapse of 2008 are still overshadowing the market today.

Gone are the days when hedge funds or buy-side firms would rely heavily on their counterparts’ data for the aggregation, deployment and settlement of their margin calls. Gone are the days of a single prime broker, when the re-hypothecation of assets was plentiful and profitable. The world is now a different place in the realm of collateral management.

Buy-side firms have been progressively moving to a multi-prime broker model; this trend combined with the introduction of regulatory reform is going to introduce a whole new level of operational complexity for which few buy-side firms are prepared.

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