Our Operations Group

Information and Exposure Management focuses on monitoring and acting on margin exposures with clients, and ensuring that the Firm has a central and consistent set of product and pricing data for use in all client reporting. The group also directly oversees the production of cost-basis reporting and mailed statements for Investment Management/Prime Brokerage clients.

Information and Exposure Management is organized around five major functions:

Client Margin

Margin is the extension of credit by a creditor, using as collateral margin-eligible securities either deposited by the customer or purchased in the open market as collateral. The limitations on the extension of credit are outlined in Regulation T of the Federal Reserve Board. The New York Stock Exchange (NYSE) is the self-regulatory agency that has the authority to prescribe initial and maintenance requirements for margin and cash accounts, as covered under NYSE Rule 431.

The Margin department is responsible for monitoring all client accounts.

 
“The team focuses on monitoring and acting on margin exposures with clients.”      
The group ensures compliance with the regulations of the Federal Reserve Board, the NYSE and Lehman Brothers' own internal credit policies. Maintenance margin calls are issued to clients when the equity in their account falls below the minimum margin requirement.

In addition, the department works closely with the Investment Management Division's (IMD) investment representatives and sales assistants to resolve customer service inquiries. All client requests for transfer of assets including federal fund and check disbursements, journal entry movements within Lehman Brothers, and deliveries to other firms are reviewed and approved by the Margin department.

The Futures Margin department is responsible for the monitoring of all IMD retail and institutional client futures accounts to ensure compliance with the regulations of the Commodity Futures Trading Commission (CFTC), the National Futures Association (NFA) and internal Lehman Brothers requirements.

Counterparty Margin
Margin is used to reduce our risk of loss on trades. Exposures are calculated on a daily basis using marks from close of business the day before. Exposure is reduced in a timely manner through escalation of delinquent calls to senior management when appropriate, and reports on the daily status of margin calls. The Counterparty Margin group comprises derivative margin and fixed income margin.
Derivative Margin
The Derivative Margin group decreases the Firm's exposure to counterparties by accepting collateral and sending out valuations to clients. These tasks must be executed in compliance with the rules and regulations set forth in the confirmation of a specific trade or by a credit support annex/pledge agreement.
Fixed Income Margin
The Fixed Income Margin group reports on and mitigates margin exposure to Lehman Brothers on behalf of several different fixed income products, including fixed income financing, options, and forwards. Fixed income financing, commonly referred to as a repo, constitutes the highest volume of margin calls. Exposure is reported directly to clients or the Firm's sales force via a margin call statement. The Margin group is then responsible for taking action with the client or the Firm's sales force to reduce exposure.
Product and Pricing

The Product team is responsible for creating and maintaining all security-indicative data in the various trade processing and clearance systems to ensure accurate trade capture and settlement processes. The team is also responsible for ensuring current and accurate pricing for all securities. The Pricing team performs various daily reconciliation reports to identify and rectify any missing or stale prices as well as those that fluctuate from day to day over certain thresholds.

The team is in the process of automating and centralizing systems to ensure consistency across all of the applications that subscribe to the data.