Following ESMA latest reglementation, Asset Managers won’t be able to delegate their reporting anymore
For an Asset Manager
Overall, Asset Manager will pay a higher price for a more complex, hard to maintain system. Leading to more operational risk and potential reglementary breaches while allocating some of their own resources to control trade execution and provide proper reporting to the regulator. Interest in delegating this service is therefore plummeting.
As none of FX positions taken on behalf of the fund for share class hedging purpose are transmitted to the asset manager’s risk department, they can’t properly assess their risks. Metrics provided to the regulator will not reflect reality leading to a reglementary breach.
Furthermore, EMIR categorization can also be wrongly assess as the FX limit computed does not take into account orders executed by the service provider on behalf of the fund.
Some asset managers potentially delegate share class hedging to several service providers which increases drastically complexity to retrieve mandatory information in due time for the risk and the reporting department.
By only delegating computation, Asset Managers lean on their own trading desk to execute those orders.
As they consist in plain vanilla products and are contracted for hedging purpose, no added value is required to execute those trades. In fact, execution can be fully automated on a platform like FX-All.
Risk, regulatory and compliance department will also be automatically updated using already existing internal processes.
HedgingFX was also able to secure a partnership with a leading insurance company which agreed to cover any potential miscalculation risk from up to 4 millions Euros.
For an investment bank
The best of two worlds
As an investment banker, maintaining this tool in production is extremely costly and requires numerous staff from different teams.
Scalability is often an issue and assessing any upgrade turns out to be costly and time consuming leading to client’s dissatisfaction.
HedgingFX, leaning on its small structure with a high degree of expertise, tackles those issues with a flexible and scalable environment. Assessing any upgrade’s request from your clients is always done in a timely manner.