The way forward to collateral fluidity


SIX Securities Service—through SIX Repo—is developing a new methodology based on the seamless sourcing and pooling of collateral. Head of repo and securities finance Nerin Demir explains

New global regulatory requirements are currently forcing parties in the financial value chain to look differently at how they collateralise their counterparty exposures. Firms will be required to hold a greater proportion of cash and high-quality liquid assets.

SIX Securities Service—through SIX Repo—is developing a new methodology based on the seamless sourcing and pooling of collateral. In close cooperation with industry bodies, clients and regulators, it is committed to raising key challenges in the area of securities finance and develop better ways to deliver innovative, high-quality, state-of-the-art solutions.

Some of these topics raised recently cover:

The increasing demand for equity repo financing

SIX Repo has increased the number of equity index baskets and added two additional security types, US equities and fixed income (treasuries). The inclusion of US equities will enhance the already broad equity financing portfolio that SIX Securities Services offers, covering the major European indices (SMI, DAX, CAC40, FTSE, MIB and IBEX) while complementing SIX Repo’s ‘repo on demand’ service, enabling the financing of any combination of tailored baskets.

Single access to market liquidity

SIX Repo’s collateral management strategy--supported by the Swiss National Bank--builds on its current triparty service and brings a new independent and integrated solution to the market, facilitating improved access to market liquidity and collateral hubs. The future offering will increasingly relieve the operational burden of the two entities engaged in a trade by taking on all post-trade processing during the life cycle of the trade, such as the collateral allocation and automatic substitution as well as settlement and payment.

The future role of distributed ledger technology in collateral management

Distributed ledger technology could eliminate costly and time-consuming collateral settlement moves, and instead track the collateral in a near real-time environment while providing almost instant insight into which collateral position is currently in use or available. This means that real-time collateral management can be plausible without any significant cost increases, providing many benefits to banks balance sheets.

SIX is currently working on two use cases to create new services leveraging distributed ledger technology--one is focusing on the product issuance process while the other is focusing on collateral optimisation capabilities

About CO:RE: The integrated securities finance offering from SIX Securities Services

CO:RE (Collateral & Repo) is the real-time securities finance offering powered and operated by SIX Repo. It brings together trading and collateral management capabilities in a fully integrated value chain starting from trading through settlement and finally to collateralisation at the central securities depository or custodian level. The need to drive efficiency, reduce risk and control costs has resulted in an efficient collateral management offering for all market players, providing benefits for banks, broker-dealers, insurance firms, commercial banks and asset managers alike.

SIX Securities Services provides a multifaceted electronic trading facility offering single-point access to the over 160 counterparties trading repo contracts across 14 currencies. Central bank money and commercial bank money are both available as well as access to the Swiss National Bank’s primary market for the issuance of money market instruments. Thanks to excellent operations, the accuracy of exposure coverage and the solid legal framework, no haircuts are applied to the available collateral whereas the range of collateral covers a wide range of currencies and geographical areas.
Features
The latest features from Securities Lending Times
ESMA has set about tackling the thorny issue of conflict of interests within central counterparties under EMIR, with the help of industry participants. Jenna Lomax examines the industry’s responses to the consultation
For those on the front lines of the securities lending industry it’s easy to forget that, for beneficial owners, the trials and tribulations of regulatory compliance and the ever-raging debate around the use of central counterparties (CCPs) are only of passing concern
Join Our Newsletter

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

Subscribe now
Mirae Asset Securities (USA) is now operational in the securities lending, repo, foreign research distribution, corporate access and agency execution businesses.
Experts debate whether equities as collateral will ever be acceptable
Securities lending is a relatively low-return product, but any well-managed programme can be customised to mitigate the risks down to a level that justifies those returns, according to Simon Waddington of State Street
eSecLending is preparing to publish the third edition of its Best Practices for Securities Lending whitepaper. Here, the agent lender provides a preview
Lenders that have the ability to adapt their lending programme in line with the industry’s ongoing evolution can expect to be the biggest beneficiaries, says Sunil Daswani of Northern Trust
More efficient collateral allocations and better informed trading decisions are possible by improving visibility and understanding costs, says Pirum’s Robert Frost
Country profiles
The latest country profiles from Securities Lending Times
Zubair Nizami, head of Asian securities lending trading at Brown Brothers Harriman talks to Drew Nicol about the state of the industry in the region
Being an exciting emerging market is all well and good, but how long can that status really apply before interest wanes? India is doing its best not to find out
Asset Servicing Times

Visit our sister site
for all the latest asset servicing news and analysis

assetservicingtimes.com
Hugh Leonard, director of repo sales at Australia and New Zealand Banking Group, explains how the Australian market has excelled in recent years
Securities lending is in a strong place in Australia. Dane Fannin, head of capital markets in the Asia Pacific at Northern Trust, explains the available opportunities
Federico Ortega Gilly of Mexico’s Nacional Financiera explains why his country’s securities lending market is ripe for foreign investment
Russia’s National Settlement Depository has had a busy year making its securities finance market more robust and attractive to outside investors. The CSD’s Alina Akchurina explains the innovations being implemented
South Africa’s securities lending industry is on the verge of embracing a modern T+3 settlement cycle that could boost the country’s market
Experts on Canada’s securities lending industry discuss the market’s qualities compared to others, finding it to be a strong source of HQLAs
Interviews
The latest interviews from Securities Lending Times