Collateral Management

MICHAEL SIMMONS is a financial services operations specialist with expertise in post-trade processes. For over 20 years, he worked at a blue-chip investment bank (S.G. Warburg and Warburg Securities) where he was the manager of Fixed Income (Bond) Operations. Over these two decades of hands-on experience in the field, Mike identified a need for practitioner-oriented education programs on multiple aspects of operations, including the securities trade lifecycle, corporate actions, operational risk and associated controls. He thus began writing and delivering popular training courses, including the Operations Certificate Programme (a 5-day multi-subject examined qualification) for the International Capital Market Association. He is the author of two previous books, namely Securities Operations and Corporate Actions. Observations on the style and content of this book can be conveyed to the author by email to info@mike-simmons.com.

• Foreword xviiAcknowledgements xixAbout the Author xxiIntroduction xxiiiPart 1 Introductory ElementsChapter 1 Fundamental Collateral Concepts 3Chapter 2 The Nature and Characteristics of Collateral Types 7Part 2 Sale & Repurchase (Repo) Trades and CollateralChapter 3 Sale & Repurchase (Repo) Trades and Collateral – Introduction to Repo 29Chapter 4 Sale & Repurchase (Repo) Trades and Collateral – Classic Repo Trades 33Chapter 5 Sale & Repurchase (Repo) Trades and Collateral – The Repo Trade Lifecycle 79Introduction 79Chapter 6 Sale & Repurchase (Repo) Trades and Collateral – Stock-Based Classic Repo Trades 101Chapter 7 Sale & Repurchase (Repo) Trades and Collateral – Repo Trade Variations 103Chapter 8 Sale & Repurchase (Repo) Trades and Collateral – The Global Master Repurchase Agreement 121Part 3 Securities Lending & Borrowing and CollateralChapter 9 Securities Lending & Borrowing and Collateral – Introduction to SL&B 161Chapter 10 Securities Lending & Borrowing and Collateral – Principles of SL&B 167Chapter 11 Securities Lending & Borrowing and Collateral – The SL&B Trade Lifecycle 211Chapter 12 Securities Lending & Borrowing and Collateral – Accessing the SL&B Marketplace 237Chapter 13 Securities Lending & Borrowing and Collateral – The Global Master Securities Lending Agreement 253Part 4a OTC Derivatives and CollateralChapter 14 OTC Derivatives and Collateral – Transaction Types – Introduction 295Chapter 15 OTC Derivatives and Collateral – Transaction Types – Generic Structural Aspects 303Chapter 16 OTC Derivatives and Collateral – Transaction Types – Interest Rate Swaps 311Chapter 17 OTC Derivatives and Collateral – Transaction Types – Credit Default Swaps 319Chapter 18 OTC Derivatives and Collateral – Transaction Types – Foreign Exchange Swaps 329Chapter 19 OTC Derivatives and Collateral – Transaction Types – Cross-Currency Swaps 341Chapter 20 OTC Derivatives and Collateral – Legal Protection – Introduction 349Chapter 21 OTC Derivatives and Collateral – Legal Protection – Master Agreement and Schedule 351Chapter 22 OTC Derivatives and Collateral – Legal Protection – Credit Support Annex 361Chapter 23 OTC Derivatives and Collateral – Static Data 401Chapter 24 The OTC Derivative Collateral Lifecycle 413Chapter 25 OTC Derivatives and Collateral – The Collateral Lifecycle – Pre-Trading – Legal Documentation 415Chapter 26 OTC Derivatives and Collateral – The Collateral Lifecycle – Pre-Trading – Static Data 419Chapter 27 OTC Derivatives and Collateral – The Collateral Lifecycle – Trading – Trade Execution 421Chapter 28 OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade Capture 429Chapter 29 OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade Confi rmation/Affi rmation 435Chapter 30 OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade/Portfolio Netting 439Chapter 31 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Portfolio Reconciliation 447Chapter 32 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Marking-to-Market 457Chapter 33 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Exposure Calculation 463Chapter 34 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Receiving Margin Calls 475Chapter 35 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Issuing Margin Calls 501Chapter 36 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Holding Collateral 515Chapter 37 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Introduction 531Chapter 38 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Novation 533Chapter 39 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Unwind 541Chapter 40 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Offset 547Chapter 41 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Credit Events 553Chapter 42 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Collateral Substitution 559Chapter 43 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Income & Corporate Action Events 567Chapter 44 OTC Derivatives and Collateral – The Collateral Lifecycle – Trade Termination – Trade Termination 575Part 4b OTC Derivatives and Collateral – Legal DocumentationChapter 45 OTC Derivatives and Collateral – Legal Documentation 579Part 4c OTC Derivatives and Collateral – Regulatory Change and the Future Of CollateralChapter 46 OTC Derivatives and Collateral – Regulatory Change and the Future of Collateral – Introduction 583Chapter 47 OTC Derivatives and Collateral – Regulatory Change and the Future of Collateral – Centrally Cleared Trades 597Chapter 48 OTC Derivatives and Collateral – Regulatory Change and the Future of Collateral – Non Centrally Cleared Trades 629Glossary of Terms 657Useful Websites 703Further Reading 705Index 707