05 August 2016
New York
Reporter: Mark Dugdale

BNY Mellon analyses new collateral management tools

Market participants need to become more efficient when financing their transactions, according to BNY Mellon, whose new report outlines the key strategies to adopt in collateral management.

The report, Collateral Solutions for a Changing Market, pinpointed peer-to-peer relationships as one avenue for institutional investors to pursue given that prime brokers are becoming more selective in who they work with in financing.

Michelle Neal, president of BNY Mellon Markets, summarised: “Market participants need to be more efficient when financing transactions, which means they need to allocate the least expensive collateral to each trade, possess a full view of which collateral is available and which is being used, and applying efficient collateral management techniques to a variety of transactions.”

“Simply put, optimising collateral management means having the right assets, in the right place, at the right time.”

As well as peer-to-peer-relationships, the triparty model continues to be a suitable means of collateral management, according to the report. Although it has traditionally been used in repo and securities lending, BNY Mellon has noted the model being used to cover a range of exposures and obligations.

Market participants should consider using a range of tools, including collateral pledge structures, structured notes and the cross-border allocation of Japanese government bonds as part of an overall strategy to optimise collateral and find efficiencies.

Many participants are also new to collateral management, with initial margin and variation margin requirements bringing the need to post collateral to their businesses for the first time.

They are struggling with data, cash and inventory management, making it easier to deal in cash collateral, according to BNY Mellon.

“The collateral management and segregation space today is quite dynamic. These changes are putting operational pressures on firms and requiring them to take on new activities,” commented Jim Malgieri, head of collateral management and segregation at BNY Mellon Markets.

“There is a learning curve with the changing requirements as all market participants adapt and retool their operations to enhance their processes and create efficiencies.”

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
J.P. Morgan and Citi collaborate on truePTS post-trade platform
15 December 2017 | New York | Reporter: Zsuzsa Szabo
The New-York-based startup processes ecosystem for the global $700 trillion derivatives market
SIFMA: US market requires improved CCP access
15 December 2017 | Washington DC | Reporter: Jenna Lomax
The Dodd-Frank Act has increased the need for US firms to have access to non US swaps trading venues and central counterparties, according to paper by FIA and SIFMA
France raises spectre of European financial transactions tax
15 December 2017 | Paris | Reporter: Jenna Lomax
French President Emmanuel Macron and several ministers have dismissed concerns over the negative effect of an EU financial transactions tax on securities lending revenue
Vekaria exits Credit Suisse
14 December 2017 | Dublin | Reporter: Zsuzsa Szabo
Head of Credit Suisse's Dublin branch Manish Vekaria has left the bank
Cerberus hires new managing director
14 December 2017 | New York | Reporter: Jenna Lomax
Kimmel was previously global head of prime services at Cantor Fitzgerald
SMEs to face new research costs under MIFID II
14 December 2017 | Frankfurt | Reporter: Zsuzsa Szabo
Research services for SMEs will no longer be free of charge when MiFID II comes into force on 3 January 2018
Hedge funds in sprint finish for record-breaking returns in 2017
14 December 2017 | London | Reporter: Drew Nicol
Hedge funds are on track for their best annual revenue since 2013 with average returns of 7.7 percent, according to eVestment research