Committees: Swaps Video Highlights
In continuing to ensure that the AMF Swaps Best Practices initiative is both transparent and wide-reaching, the Forum has posted video highlights below of the February 9, 2005 Quarterly Meeting and the October 27, 2004 Swaps Workshop. The purpose of these videos is to keep the industry informed about initiative developments and to encourage all relevant parties (buyside, sellside, custodians and vendors) to participate. Below are links to eleven video highlights, ten videos are from presentations of the subcommittees and one video is a message from 2004 ISTIC-IOA Chairman Kevin R. Smith of The Bank of New York. These videos and corresponding descriptions highlight some of the initial recommended best practices being considered by the AMF Swaps Committee. If you are interested in participating in the work of the AMF Swaps Initiative, please contact the staff of the Technology, Operations and Asset Manager Relations Department.
George Hall of Goldman Sachs Asset Management is Chairman of the AMF Swaps Committee.
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Tracey Jordal Jason Jesner Jean Ebbott George Hall NYC |
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Marcia Clark Newport Beach |
Swaps Compliance (Marcia Clark, PIMCO)
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Marcia Clark explains that in order to best monitor the risk characteristics of a swap, a best practice would be to monitor the underlying security and yield curve which ultimately determines the gains or losses on that swap. As a possible compliance best practice, asset managers should examine the risk of the underlying market and then aggregate that risk to the real risk of loss, which is broken into two avenues, namely, its volatility and its risk of default.
February 9, 2005Swaps Confirm/Legal (Tracey Jordal, PIMCO)
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In considering best practices for swaps documentation, Tracey Jordal explains that using an umbrella or multi-fund ISDA Master Agreement is being considered among the subcommittee's proposed best practices. An umbrella agreement could eliminate having several agreements with a counterparty, which could free up resources. When a new fund is added, an appendix is simply added to the ISDA. Tracey also explained that having a standardized collateral control agreement could also make the documentation/legal process more efficient.
February 9, 2005Swaps Maintenance (George Hall, Goldman Sachs Asset Management)
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Speaking for Joseph Pomo of GSAM, George Hall (Chairman of the Swaps Committee) reviews some of the initial best practices of the AMF Swaps Maintenance Subcommittee which relate to tracking resets and managing collateral. One of the initial recommendations is that payments are confirmed with the counterparty five business days prior to payment date, except where impractical due to non-availability of data. This proposed best practice could expedite the process, improve control and reduce the amount of fails in the market.
February 9, 2005Swaps Trade Execution (Jason Jesner, Credit Suisse Asset Management)
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Jason Jesner presents on two of the initial recommendations of the Trade Execution Subcommittee. First, the subcommittee proposes that, if possible, an ISDA Agreement be negotiated before trading since the agreement clearly establishes the trading terms. Furthermore, to help mitigate operational risk, post-execution trade communication should occur electronically between the broker, investment manager and custodian.
February 9, 2005Swaps Valuation (Jean Ebbott, Morgan Stanley Investment Management)
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Jean Ebbott describes two of the initial recommendations being proposed by the AMF Swaps Valuation Subcommittee. First, on T+1 and daily thereafter until the swap matures or closes out, the asset manager should reconcile all open swap positions and market values between the broker/dealer and Investment Advisor by using common trade attributes. On a weekly basis, Custodians should reconcile all open swap positions with the Investment Advisor. This proposed recommendation could reduce operational risk and help to ensure that an accurate valuation is calculated for the fund's NAV. Also, asset managers should consider obtaining an independent swap price for mutual funds, at least on a periodic basis, in order to verify the accuracy of their internal pricing calculations.
October 27, 2004Trade Execution Panel Video
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In this video highlight, Subcommittee Chair Jason Jesner of CSAM describes the work of the subcommittee and introduces the workshop participants to the trade flow diagram, which maps out the steps of a swap transaction from pre-trade to execution to post-trade. Mr. Jesner invites the industry to offer comment and input relating to subcommittee's flowchart. The flowchart has been used as a springboard to foster dialogue regarding common industry pain points in swaps processing. Philip Blake of BlackRock begins to describe the process and explains that many industry participants continue to verbally confirm trade details on the phone and send physical (non-electronic) confirmations. In offering a sellside perspective, Eileen Yin of CSFB states that it is important for broker/dealers to have the allocation information on trade date and that the subcommittee may consider it to be a "best practice".
(Pictured left to right: Eileen Yin, CSFB; Robyn Spillane, Northern Trust; John Lewis, Scrittura; Chip Carver, Swapswire; Philip Blake, BlackRock and Jason Jesner, CSAM)
October 27, 2004Confirm/Legal Panel Video
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In this video highlight, Subcommittee Chair Tracey Jordal of PIMCO explains the scope of the Confirm/Legal Subcommittee, namely, to identify possible industry best practices for negotiating ISDAs, setting the credit support annex, working with custody/control agreements and dealing with confirms. Linda Singer begins to describe the difference between a single/stand alone agreement and a multi-fund ("umbrella") agreement. Renata Mulder explains that both type of agreements are used in the industry. The subcommittee discussed that typically, it is operationally easier to use the asset manager's umbrella agreement and it is being considered as a possible "best practice".
(Pictured left to right: Linda Singer, Subcommittee Member; Renata Mulder, Morgan Stanley; Bill Kovacs, 40/86 Advisors and Tracey Jordal, PIMCO)
October 27, 2004Compliance Panel Video
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In this video highlight, Marcia Clark of PIMCO describes the purpose of the Compliance Subcommittee, which is to discuss issues around client manadates and risk management and to understand the risk exposures that swaps add to a client portfolio. The subcommittee will address three risk elements: currency risk, credit/default risk and interest rate risk and how these risks are monitored to ensure that the clients' risk tolerance is not exceeded.
(Pictured left, Joseph Sack, The Bond Market Association and Marcia Clark, PIMCO)
October 27, 2004Valuation Panel Video
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In this video highlight, Subcommittee Chair Jean Ebbott of MSIM states that the aim of the subcommittee is to document the process flows for the valuation of a swap and to identify possible best practices for both a manual and automated set of industry best practices. The asset managers of the subcommittee agreed that it is important to receive/produce a valuation on trade date. Nirav Sheth of MSIM explains that the asset managers worked with broker/dealers to create a list of critical attributes that are needed to produce a good valuation. These attributes are highlighted in the subcommittee's presentation.
(Pictured above, left to right: Nirav Sheth, MSIM; Brad Payne, State Street; Umesh Bhide, Bear Stearns PricingDirect; Tony Cassese, Lehman Brothers; Jim Blinn, SQX and Jean Ebbott, MSIM)
October 27, 2004Maintenance Panel Video
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In this video highlight, Subcommittee Chair Joseph Pomo of GSAM states that the subcommittee is concentrating on payments and collateral management. In the payments area, the subcommittee has discussed resets, combinations/unwinds and assignments/novations. Ila Eckoff of BlackRock explains that receiving and matching payment and reset data electronically could be an ideal situation.
(Pictured left to right, Eileen Felix, ABP Investments; Ila Eckoff, BlackRock; Neil Burke, Morgan Stanley and Joseph Pomo, GSAM)
October 27, 2004Kevin R. Smith Video
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ISITC-IOA Chairman, Kevin R. Smith, Senior Vice President at The Bank of New York, offers the support of ISITC-IOA in the AMF Swaps Best Practices Initiative. Mr. Smith encourages custodians to join the industry effort and to lend value to the subcommittees where needed.