Post-trade | Collateral management
“In an era of strict capital requirements, larger buyside clients may find it easier to take advantage of transformation services than smaller clients.” Ted Leveroni, Omgeo
Meeting the challenges With all these challenges, the focus has been on standardisation and automation. “One of the biggest challenges has been that everyone has historically dealt with collateral management in silos. Collateral transactions on a bilateral basis, stock lending, repo financing, were all different groups. Optimisation is the word on everyone’s lips. The other word is enterprise collateral, the capability to manage all across these multiple silos in a consolidated fashion,” explains Jane Milner, head of strategy for securities finance, and enterprise collateral management at SunGard. Collateral agents have been developing a range
of services around collateral optimisation and collateral transformation, two major buzzwords in the industry. Richard Young, head of regulatory affairs at SWIFT explains that a key objective is to consolidate collateral pools at market level, enabling market participants to keep track of the assets deposited and help holders of collateral channel securities in the most efficient way where they are needed. “We don’t fully know how this will all play out, as the clearing obligations around derivatives and some of the other drivers for collateralisation have not fully kicked in yet.”
Solutions But providers are looking at solutions. Custodians have been expanding their range of products,
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whether by consolidating their services or building new ones. Banks are also looking at offering more collateral management services. Specific solutions from ICSDs include Euroclear’s launch of its GC Access Service, allowing clients to lend or borrow baskets of high quality securities in exchange for other collateral. “It’s critical for clients to be able to mobilise their assets in an efficient and optimal way. We are working on bringing new liquidity to the market. We have identified pools of collateral that were previously not easily available to the market and are unlocking these pools by offering an innovative securities lending solution to investors. Our new service leverages the risk management model associated with a reputable automatic securities lending programme in order to give lenders access to street lending,” explains Olivier de Schaetzen, head of product solutions, Global Markets, at Euroclear. In addition, Euroclear’s Open Inventory Sourcing
solution allows clients to use assets in domestic markets for international financing, having set up deals with Citi, BNP Paribas, and Standard Chartered. “We are agnostic in terms of market instruments, depending on where demand is. We’ve started with Italy and Spain for fixed income but will soon expand to equities and other markets like France, Belgium and Germany,” de Schaetzen explains. Young says that optimisation will usually be the
Best Execution | Summer 2013
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