Framesoft Contract Repository (FCR) · Capital and close-out
Determine what is nettable — and keep the rules current.
Automated netting determination based on legal opinions, contractual terms and configurable rules. The Netting Analyzer covers liquidation netting and collateral arrangements, with a real-time netting flag in FCR 5. Framesoft Confirmation Generator (FCG) is covered below.
Benefits
- Legal-opinion driven determination
- Counterparty, branch, agreement and product scope
- Configurable rules for regulatory change
- Feeds trading, credit risk and capital processes
Capital, collateral and the governing agreement
Institutions set aside shareholders’ equity for credit risk on derivatives, which raises the cost of capital and ties up capacity. Master agreements with netting reduce that exposure and the collateral that has to be posted, but only when the risk-reducing quality is evaluated against legal opinions or regulatory requirements. Each transaction included in netting also has to be confirmed with a correct reference to the governing master agreement.
FCR and FCG together
The Netting Suite is FCR as the central store of contract, counterparty and product data, and the Confirmation Generator (FCG) to produce trade confirmations that cite the right master agreement. Data structures and rules are configurable so a change in business practice or regulation does not wait on a development project.
Liquidation and collateral, as two runs
Netting reduces credit, settlement, liquidity and systemic risk, and it is also how a creditor’s ability to seize and liquidate collateral is evaluated. Netting types and systems are configured in FCR, each with its own rule set. Liquidation netting reads the master agreement and its annexes. Collateral netting then checks which products are enforceable under the collateral annex. The master is evaluated first for the products it covers; collateral rules may remove products from that set. The intersection of the two runs is the collateral eligibility matrix. Counterparty type is held on the master agreement so it is not entered twice, while collateral rules still depend on that type. The engine runs on demand or as a batch, down to branch, for every agreement whose jurisdiction and type have rules. Annexes can add products after the master check succeeds. The Analyzer evaluates one agreement, a group, or a free selection, and it shows the reasons.