OpenGamma, a London-based, privately held provider of over-the-counter (OTC) derivatives trading solutions, says it is “working with dealers and other OTC derivatives market participants to deliver an open source model to calculate the margin on bilateral derivatives trades.”
The solution will “implement the final Standard Initial Margin Methodology,” being developed by the International Swaps and Derivatives Association (ISDA), and will “meet the requirements set by the Basel Committee and due to be implemented by December 2015,” according to a statement, which also notes that the source code for the implementation will be offered online for free.
The result, OpenGamma says, will be “full transparency and open access to source code for margining [that] will for the first time empower industry participants to have an independent and verifiable calculation framework that is not controlled by any one entity,” officials say.
All iterations of the source code used for calculation of margin will be “fully available [on www.github.com ] to all market participants to plug into their respective utilities and proprietary trading systems, enabling a consistency of calculations across the industry that was not previously possible,” the company says.
“With capital scarce, financial firms are more focused than ever on developing high-value, proprietary innovations rather than re-creating industry-standard methodologies,” Mas Nakachi, CEO of OpenGamma, says in a prepared statement. “That’s why we’re working with the industry to streamline and democratize the development of market structure solutions, which also fundamentally reduces operational and systemic risk through the inherent transparency of open source code. We believe the future of OTC market structure will be driven by the need for transparency and will therefore be based on open standards.”
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