Optimising the cost of a collateral trade

Optimising the cost of a collateral trade

By Alvin Oh, global trading product owner, and Iain Mackay, global post-trade product owner at EquiLend

Can you see your assets? Can you see your obligations? Are you managing your regulatory needs appropriately? Being able to view inventory and collateral obligations with certainty is a basic need of a collateral manager; however, this is not as easy as it seems.

At a time when the securities finance industry is driving for technology solutions to manage the new paradigm of increased regulatory oversight, the perception that a collateral trader can view their obligations on an intraday basis across business silos (yes, they still exist) and utilise available inventory is misunderstood.

A proliferation of internal and external systems have evolved over time for differing needs to manage what has become an increasingly complex business. With most other areas of trading and post-trade within the securities finance industry now optimised and, in many cases, automated with full transparency with systems like EquiLend, one of the final functions within the industry to become truly optimised is collateral.

Collateral trade workflow consists of three areas, each of which faces its own challenges when considering optimising the costs of the trade. Across these three areas, in order to achieve a truly optimised process, firms must:

1. Understand their long or short box and identify the costs of using that inventory (Inventory Management)

2. Be aware of who the appropriate counterparts are and be able to execute these trades in an automated way (Trade Execution)

3. Maintain a frictionless trade by leveraging straight-through processing (STP) for settlement and achieve a real-time view of exposure positions (Lifecycle Management)

EquiLend is ideally placed to help firms solve these collateral challenges. Just this year, EquiLend has begun implementation of a variety of services to support clients across their inventory management, trade execution and lifecycle management functions to streamline the collateral process and to calculate the true cost of doing a collateral trade. EquiLend’s new solutions in this space include:

Inventory management: EquiLend Spire, a technology hub for securities finance firms of all types

Trade execution: EquiLend’s Collateral Trading platform, due in Q1 2020

Lifecycle management: EquiLend Exposure, which provides a real-time overview of portfolio management

EquiLend Spire, EquiLend Collateral Trading and EquiLend Exposure offer seamless interaction and connectivity for firms looking to optimise their collateral trading. Each may be used in isolation to complement a firm’s activities in this space; together, they offer businesses complete insight and control in this once-opaque market.


This thought leader features in the Collateral in 2020 Guide. Download the full guide here.