To optimise, mobilise and connect: the keys to growth in collateral management
11 October 2022
Eric Badger, managing director and global head of client relationships, Clearance and Collateral Management at BNY Mellon, explains how the firm is leveraging its global scale, real-time data capabilities and a state-of-the-art platform to meet client demands
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BNY Mellon continues to invest in its collateral management platform, enabling clients to optimise, mobilise and connect collateral against trading liabilities around the world. A key differentiator of our collateral management offering is our global scale and the several thousand clients that leverage our network. We continue to expand our collateral management network globally — including traditional and alternative asset managers, sovereign wealth managers and insurance companies. BNY Mellon has added a third data centre dedicated to this business, further strengthening its resilience and accelerating the firm’s technology transformation. This scale, diversity and resiliency enables clients to operate in the most optimal and efficient way possible.
Figure 1
Figure 2
User experience
We continue to improve the way clients access BNY Mellon’s collateral management capabilities through our user interface and APIs. We created a new, single point-of-entry into the collateral platform where you can access market-leading capabilities in a state-of-the-art ecosystem. The new user interface, AccessEdge, available in Your Collateral Universe, allows clients to view specialised analytics to monitor their key performance indicators (KPIs), active trades, pending items and liquidity status, as well as a range of insights and research across time horizons and security types.
Digital and data solutions are foundational to BNY Mellon’s strategy and a large part of the user experience. BNY Mellon continues to invest in analytics and productivity tools, which support further growth of the collateral management network. The firm has a suite of APIs to automate clients’ interactions with its technology, which includes near real-time data delivery to help facilitate informed and timely decision making.
Clients can also access BNY Mellon’s digital application, RULE, to negotiate collateral eligibility rulesets electronically. Clients continue to look for more flexibility and granularity when determining eligible collateral. We have developed eligibility parameters that meet a wide variety of receiver preferences — including targeted ESG goals, Special Purpose Acquisition Corporation (SPAC)-related criteria and enhanced ETF capabilities that can be enabled using the RULE interface. This new technology had a meaningful impact on the industry’s ability to create thousands of new rule sets for Phase 6 of the Uncleared Margin Rules (UMR), while also contributing to improved operational efficiencies and a superior client experience.
As BNY Mellon’s digital transformation evolves to include digital assets, enabling their use is foundational to broader market developments and to the future of custody. Extending services and collateral eligibility to include this emerging asset class will allow clients and partners across the industry to realise the true value of this revolutionary technology. Through innovative technology-based solutions, we aim to increase efficiency in the market and provide real business value for clients.
Optimisation
In today’s financial markets, the demand for aggregation and the efficient allocation of collateral is accelerating. Our clients are investing in capabilities to have a comprehensive view of their sources and uses of collateral while optimising across asset types, transaction types and venues. Additionally, new regulations are creating incentives for more efficient liquidity, balance sheet management, collateral finance assessments and decision making.
Clients are leveraging the strength of BNY Mellon’s collateral optimisation, eligibility screening and directed allocation solutions, which offer a more efficient and configurable method of allocating collateral. Our optimiser uses mathematical algorithms, client-defined inventory data, customised cost models and security reference data to reduce funding costs associated with Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and Comprehensive Capital Analysis and Review (CCAR).
To optimise settlements efficiently, we are delivering advanced data and analytics to forecast bilateral treasury repo rates and bilateral settlement fails. Clients are now able to mitigate these fails in an automated manner that will deliver a material benefit to the market, improving liquidity and reducing costs. We are working with clients to manage and prioritise liquidity, regulatory lockups and prefunding obligations.
Once clients have an optimal view of their collateral, the next question is how you efficiently mobilise that collateral.
Mobilisation
Cross-border and legal entity mobilisation of marketable securities is a central feature of the collateral markets. We are seeing demand for collateral mobility driven by the need to meet regional obligations, minimise shortfalls and meet UMR regulations. Our one-platform strategy and interoperability tools facilitate the efficient movement of collateral to meet these client obligations across BNY Mellon’s US$5.8 trillion platform.
Additionally, as part of our Future of Capital Markets Infrastructure programme, our focus on mobilising collateral to central counterparties (CCPs) will assist clients with greater operational efficiencies across the globe.
BNY Mellon is developing services to support tokenised Treasuries from a clearance, settlement and collateral management perspective across regions. This will be achieved by bridging traditional and future market infrastructure technology platforms that will deliver digital asset custody and tokenisation-as-a-service. Efficient mobility requires connectivity to other regions and other service providers across BNY Mellon’s platform and third-party venues.
To fully optimise and mobilise collateral, connectivity to other venues is essential.
Connectivity
Our platform facilitates connectivity to triparty agents, CCPs, central banks and fintechs, and is integrated with clients’ internal systems. Connecting across our collateral ecosystem and to external pools of collateral is key to serving clients and the industry. The addition of new markets and pools of collateral in which clients connect and finance inventory is a primary focus of ours. Examples include Hong Kong Stock & Bond Connect, Euroclear Collateral Interface and, more recently, Korea, Indonesia and, later this year, Malaysia fixed-income and equity collateral.
An example of cross-venue connectivity is our interaction with HQLAX — a platform addressing the fragmentation in European securities markets. The platform allows for frictionless movements of collateral across the custodian and triparty agents. We are also collaborating with fintech aggregators to integrate our state-of-the-art digitised triparty collateral schedules and other digital solutions. These collaborations allow BNY Mellon to continue to innovate, deliver operational efficiency, improve accuracy and timeliness, and add additional clients to our network.
BNY Mellon has made significant investments to advance its collateral platform from a technology architecture and business capability perspective, which have resulted in a best-in-class experience for our clients. We are innovating to meet the demands of the industry and to help clients optimise, mobilise and connect their assets and liabilities across the globe. We will continue this journey with our clients in Your Collateral Universe.
Figure 1
Figure 2
User experience
We continue to improve the way clients access BNY Mellon’s collateral management capabilities through our user interface and APIs. We created a new, single point-of-entry into the collateral platform where you can access market-leading capabilities in a state-of-the-art ecosystem. The new user interface, AccessEdge, available in Your Collateral Universe, allows clients to view specialised analytics to monitor their key performance indicators (KPIs), active trades, pending items and liquidity status, as well as a range of insights and research across time horizons and security types.
Digital and data solutions are foundational to BNY Mellon’s strategy and a large part of the user experience. BNY Mellon continues to invest in analytics and productivity tools, which support further growth of the collateral management network. The firm has a suite of APIs to automate clients’ interactions with its technology, which includes near real-time data delivery to help facilitate informed and timely decision making.
Clients can also access BNY Mellon’s digital application, RULE, to negotiate collateral eligibility rulesets electronically. Clients continue to look for more flexibility and granularity when determining eligible collateral. We have developed eligibility parameters that meet a wide variety of receiver preferences — including targeted ESG goals, Special Purpose Acquisition Corporation (SPAC)-related criteria and enhanced ETF capabilities that can be enabled using the RULE interface. This new technology had a meaningful impact on the industry’s ability to create thousands of new rule sets for Phase 6 of the Uncleared Margin Rules (UMR), while also contributing to improved operational efficiencies and a superior client experience.
As BNY Mellon’s digital transformation evolves to include digital assets, enabling their use is foundational to broader market developments and to the future of custody. Extending services and collateral eligibility to include this emerging asset class will allow clients and partners across the industry to realise the true value of this revolutionary technology. Through innovative technology-based solutions, we aim to increase efficiency in the market and provide real business value for clients.
Optimisation
In today’s financial markets, the demand for aggregation and the efficient allocation of collateral is accelerating. Our clients are investing in capabilities to have a comprehensive view of their sources and uses of collateral while optimising across asset types, transaction types and venues. Additionally, new regulations are creating incentives for more efficient liquidity, balance sheet management, collateral finance assessments and decision making.
Clients are leveraging the strength of BNY Mellon’s collateral optimisation, eligibility screening and directed allocation solutions, which offer a more efficient and configurable method of allocating collateral. Our optimiser uses mathematical algorithms, client-defined inventory data, customised cost models and security reference data to reduce funding costs associated with Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and Comprehensive Capital Analysis and Review (CCAR).
To optimise settlements efficiently, we are delivering advanced data and analytics to forecast bilateral treasury repo rates and bilateral settlement fails. Clients are now able to mitigate these fails in an automated manner that will deliver a material benefit to the market, improving liquidity and reducing costs. We are working with clients to manage and prioritise liquidity, regulatory lockups and prefunding obligations.
Once clients have an optimal view of their collateral, the next question is how you efficiently mobilise that collateral.
Mobilisation
Cross-border and legal entity mobilisation of marketable securities is a central feature of the collateral markets. We are seeing demand for collateral mobility driven by the need to meet regional obligations, minimise shortfalls and meet UMR regulations. Our one-platform strategy and interoperability tools facilitate the efficient movement of collateral to meet these client obligations across BNY Mellon’s US$5.8 trillion platform.
Additionally, as part of our Future of Capital Markets Infrastructure programme, our focus on mobilising collateral to central counterparties (CCPs) will assist clients with greater operational efficiencies across the globe.
BNY Mellon is developing services to support tokenised Treasuries from a clearance, settlement and collateral management perspective across regions. This will be achieved by bridging traditional and future market infrastructure technology platforms that will deliver digital asset custody and tokenisation-as-a-service. Efficient mobility requires connectivity to other regions and other service providers across BNY Mellon’s platform and third-party venues.
To fully optimise and mobilise collateral, connectivity to other venues is essential.
Connectivity
Our platform facilitates connectivity to triparty agents, CCPs, central banks and fintechs, and is integrated with clients’ internal systems. Connecting across our collateral ecosystem and to external pools of collateral is key to serving clients and the industry. The addition of new markets and pools of collateral in which clients connect and finance inventory is a primary focus of ours. Examples include Hong Kong Stock & Bond Connect, Euroclear Collateral Interface and, more recently, Korea, Indonesia and, later this year, Malaysia fixed-income and equity collateral.
An example of cross-venue connectivity is our interaction with HQLAX — a platform addressing the fragmentation in European securities markets. The platform allows for frictionless movements of collateral across the custodian and triparty agents. We are also collaborating with fintech aggregators to integrate our state-of-the-art digitised triparty collateral schedules and other digital solutions. These collaborations allow BNY Mellon to continue to innovate, deliver operational efficiency, improve accuracy and timeliness, and add additional clients to our network.
BNY Mellon has made significant investments to advance its collateral platform from a technology architecture and business capability perspective, which have resulted in a best-in-class experience for our clients. We are innovating to meet the demands of the industry and to help clients optimise, mobilise and connect their assets and liabilities across the globe. We will continue this journey with our clients in Your Collateral Universe.
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