Onboarding and Integration with the Lending CCP

As banks, brokers and beneficial owners begin to get serious about signing on to Eurex Clearing’s Lending CCP, we evaluate what’s required to go live. We spoke with early participants and evaluated Eurex Clearing and Pirum documents on the boarding and integration phase, IT, legal and risk requirements.
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Strategies for Securities Finance Businesses

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The securities finance industry is currently digesting the heavy meal that has been Basel III, CRD-IV, Dodd-Frank and related regional regulatory initiatives impacting the global market. These are not light appetizers at all. Rather, financial intermediaries are facing tough questions about how they will move forward in their business models. This article looks at the three main options facing market participants in their business decision making, some negative and some positive, and offers SunGard findings on market trends.

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Why did SmartStream buy Algo’s Collateral Assets? (Premium Content)

Hands connecting puzzle pices

Last week the post-trades processing vendor SmartStream purchased Algorithmics’ collateral assets from IBM. While IBM’s sale was perhaps not unexpected, the buyer was a surprise. Our first question was, what is SmartStream’s plan here? We had a chance to speak with SmartStream’s CEO and Head of Product Strategy to find out.

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Is the market moving towards collateral management utilities? (Premium Content)

Businessman And Questions

Between Sapient’s recent survey and the Clearstream Global Securities Finance Summit in Luxembourg, we’ve been hearing a lot lately about the idea of collateral management and clearing utilities. It seems that market actors are gearing themselves up to create self-managed utilities not unlike EquiLend, member-owned clearinghouses or other services that financial institutions own for their mutual benefit. But is this really happening and is it the right time?

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Straight-through Processing and the Application of Technology in Collateral Management

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Articles and reports on collateral management tend to focus on the high-level application of technology and the money to be made (or not lost) from collateral optimization. Under the hood, the reality is that collateral management for complex organizations relies heavily on technology infrastructure. This is much more than a graphic user interface at the client site; this technology extends deep into the back-end of financial markets and has a global reach. I want to share some insights we’ve gained by working with hundreds of financial institutions in this area; specifically, about straight-through processing and the technology that makes collateral management systems scalable, flexible and easy to use throughout the organization.

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The big flaw in the real-time collateral analytics boom (Premium Content)

Data

We’ve seen not one but three announcements or promotions of real-time collateral and liquidity analytics and valuations services this week, and its still just Wednesday. These services are an important step forward for a market that needs to know the value of its holdings, collateral and liquidity in real time. However, there is a big problem that remains unresolved.

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Sharing Collateral Infrastructure: A Best Case Scenario for Users

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The collateral management infrastructure market is evolving at a rapid pace, with new ideas emerging on a regular basis for how banks, insurance companies and fund managers can solve some of the most complex challenges in today’s financial markets through effective technology use. A “best case” scenario for using collateral infrastructure that shares “mutualized” technology and applications across the industry is now coming into view. This article explains that best case, and why industry utilities and shared services are the path forward for market practitioners.

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Technology Preparations for New Collateral Infrastructure

The emerging collateral environment places new requirements on banks, insurance companies and others to not only manage collateral internally, but also connect efficiently with external infrastructures. This is becoming a core question of business strategy as there are potentially meaningful cost consequences to these decisions. Finadium’s recent research report on tri-party repo and collateral agents looked at how those agents conduct their business; the reverse question is what best practices are necessary for market participants in collateralized transactions when interfacing with tri-party agents, CCPs and Central Securities Depositories.
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The Upcoming Cash vs. Non-cash Balance in Collateral Management

An important question on the horizon is the use of cash in collateral management. Financial market participants have experienced a relatively relaxed cash environment over the last few years. Cash has been inexpensive; interest rates have remained low enough that placing cash as collateral to a bilateral counterparty or to meet obligations at a CCP has meant that few opportunities were missed elsewhere.
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Collateral management, risk and trading IT: buy a front to back solution or go for best of breed?

We have heard it a number of times now: collateral management technology vendors and financial institution buyers asking whether it is best to have a front to back solution that captures trading, collateral, risk, pre- and post-trade analytics, and operations, or whether it is better to invest in or build best-of-breed solutions. We have come down to an opinion on this topic that we are ready to present.

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Trends from emerging vendors in securities finance and collateral management (Finadium subscribers only)

Finadium recently completed an analysis of emerging technologies and services in securities finance and collateral management. The results will be published in an upcoming research report (note: this is a separate report from our recently released analysis of large collateral management technology vendors). In the meanwhile, below are some common themes we see in the emerging vendor space.

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Finadium: Large OTC Derivatives End-Users on Clearing and Collateral (free via Calypso)

Finadium has released a new report, Large OTC Derivatives End-Users on Clearing and Collateral: A Finadium Survey. This report looks at the opinions of large OTC derivatives end-users as clearing mandates come into force and new priorities emerge. Distribution rights to the report have been purchased by Calypso Technology, making the report free through Calypso representatives (see below for the web link).

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Finadium report: Understanding the collateral management technology vendor market

Finadium released a report this morning, “A Strategic Guide to Collateral Management Technology Vendors,” covering the landscape and products of collateral management technology vendors. Like many Finadium reports, the focus is on breaking down the potentially confusing array of products to identify commonalities and differences in the marketplace. The report includes write-ups on eight leading vendors.

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OMGEO nails it on collateral optimization, joins SunGard and 4Sight

A press release from OMGEO today said that the firm had upgraded its ProtoColl product to include a holistic view of their collateral management needs. This is what the industry needs, and OMGEO now joins the small group of technology providers including SunGard and 4Sight that say they can get cross-product collateral management right.

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Bank of New York Mellon targets DTC-cleared paper in the next step in tri-party reform. This one is going to hurt.

Bank of New York Mellon (BNYM) has told their tri-party customers about the next step in reducing the systemic risk….and some market players fear it will create some nasty unintended consequences. Maturing tri-party trades with collateral that clear in the Depository Trust & Clearing Corp. (DTC) will have to be pre-funded. This will impair the ability to fund corporates, equities, money markets, ABS, Private Label CMOs, and muni bonds. It may limit the number of banks/broker/dealers who can offer financing.

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Does the recent NYPC/LCH.Clearnet deal inch towards a global CCP?

Last month four market actors, LCH.Clearnet Limited (LCH.Clearnet), New York Portfolio Clearing LLC (NYPC), The Depository Trust & Clearing Corporation (DTCC) and NYSE Euronext (NYX), announced that they had signed a Memorandum of Understanding to explore how to include clearing interest rates swaps from LCH.Clearnet’s Swapclear platform on the NYPC system. NYPC already provides consolidated margining for both OTC derivative and physical interest rate related products (including treasuries and GC repo). This seems like a step forward in creating a single CCP where all bond and interest rate-centric trades could be cleared (or at least a major competitor to any other individual CCP like ICE). A single CCP is something like the Holy Grail for collateral managers in the OTC derivatives markets, but can it happen? This article explorers some of the opportunities, challenges and important next steps.

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So what is next for tri-party reform?

The displeasure from the Fed on the pace of the tri-party reforms is now well known. Its not all bad news though. The systemic risk embedded in the unwind/rewind hasn’t gone away, although the window is narrower. Clearing agents can look at 3-way confirmed trades to see if there are problems brewing. Lots of other good things came out of the Task Force’s work. But the Fed wants tri-party settlement to be an “operational moment”, in other words an instantaneous process. When given the task of spec’ing out how long that would take to get there, some IT timelines extended into 2016. NY Fed head Dudley was not pleased.

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AcadiaSoft gains ground with its MarginSphere tool

When we spoke with AcadiaSoft almost three years ago, we weren’t entirely sure that there was a success story waiting in the wings there. Other collateral management technology firms that we spoke with at the same time thought that the firm had gone out of business. In fact, AcadiaSoft was and is a going concern and reported some important client wins this week including Cheyne Capital and Goldman Sachs Asset Management.

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