Keeping Up With Collateral
Collateral data management may be one of the last areas of data management to be addressed in the years following the 2008 financial crisis, but it isn't one of the least important.
As the volume of collateral transactions and the data they generate has recently been growing all the more, firms including Société Générale, BNY Mellon, JP Morgan and Deutsche Bank have spoken out about their efforts to manage the margin requirements that are part of the collateral management process, get transparency into collateral data and comply with new regulations relevant to collateral data. Industry organizations such as the Depository Trust & Clearing Corporation and the International Securities Association for Institutional Trade Communication are also addressing collateral data issues.
Since 2008, collateral management itself has changed from a back-office function to a matter of concern throughout firms, observes James Hills, a collateral business matter expert at Lombard Risk, a London-based firm with offices in New York, Shanghai, Hong Kong, Mumbai and Singapore.
Basel III, the US Dodd-Frank Act and the European Market Infrastructure Regulation (Emir) all require firms to show "existence of strong and efficient collateral management technology and processes," says Hills. These regulatory mandates may not be the only thing driving firms to devote more resources to collateral data management, but they are paving the way.
As collateral data spreads as a concern, so must the technology to keep up with that data. "Technology should be scalable for increasing volumes and developing regulatory requirements," says Hills. "Collateral systems are becoming firmly embedded into technology architectures, with growing responsibility for calculating, managing, reducing and reporting exposures, rather than being end-of-trade lifecycle applications capable only of consuming data for margin call management."
Hills adds that firms should migrate from siloed handling of collateral data management to single product platforms. Such platforms can provide central, consolidated operational workflows and monitoring of collateral data, but they still need to be configurable and flexible, he says. These platforms should also be expandable, since the business and functional requirements for collateral management are "evolving at an unprecedented rate."
Just as collateral transactions and the ensuing data are on the increase, with firms ramping up their efforts to manage this data, so is the complexity and sophistication of the tasks necessary to effectively handle collateral data. Firms and the industry as a whole will therefore have to ramp up their capabilities, not just their efforts.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: https://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Data Management
Can AI beat exceptions out of the back office?
The Waters Wrap: Agentic AI can help operations teams tackle exceptions. But first, they need to get their house in order, writes Wei-Shen.
SIX launches market data platform designed for accessibility
SIX Market Signal aims to bring price transparency, ease of use, and reduced administrative burden to the maddening world of market data.
ISS Stoxx’s new analytics, S&P and Kaiko launch joint indexes, and more
The Waters Cooler: A recap of the major tech and data news from the past week in the capital markets.
Federal court moves to certify class in Cusip antitrust suit
The SDNY judge has handed a procedural win to plaintiffs, allowing swaths of end-user firms and third-party data vendors to join the class action.
The market’s most valuable asset?
DTCC’s Tim Lind writes that using data effectively can provide the intelligence needed to improve investment performance, reduce risk, and inform strategic decision‑making.
Report once: will Esma’s €1bn reforms deliver the full picture?
Critics say plan to merge three reporting regimes will see scant returns, and won’t mesh with single-sided reporting.
Navigating the MarketAxess ICE storm
The Waters Wrap: Most of the discussion surrounding ICE’s MarketAxess buy has focused more on benefits for the front office than the data possibilities.
CTA, UTP to merge into single Consolidated Tape Plan under DataCT
Randall Hopkins, former head of market data at Nasdaq, will join the new company to build and run it.