Collateral Management Outsourcing: Providers, Market Size and Business Trends

Finadium
October 2024

Finadium reports are distributed primarily by subscription. If you are a research subscriber, please log in to download a copy of this report. Otherwise, please contact us at info@finadium.com.

A combination of regulation, technological complexity and hiring dynamics is pushing more firms than ever to consider collateral management outsourcing. Mandatory US Treasury repo clearing rules in particular will require firms of all sizes to adjust their operational and margin strategies, and most will be unable to conduct business as usual without substantive internal changes. Outsourcing presents an easier and more cost-efficient solution, leading to growth opportunities for service providers.

Placed between a firm’s internal trading and operations teams on one hand, and triparty services and central counterparties on the other, collateral obligation management outsourcing performs like an extension of the client. At its most basic, the service ensures margin movements, while a more complex iteration could be running collateral optimization models and utilizing technology to conduct inventory management for regulatory and internal reporting. Providers have responded to the diverse needs of their clients, but not all clients yet know what requirements could meaningfully benefit their businesses.

The main providers of collateral outsourcing are custodian banks, three of which have provided details on five different services for this report. As demand for outsourcing increases, these firms have a head start in delivering solutions but are not the only game in town; there are also fund administrators, trust companies and consultancies that run outsourced service desks built on proprietary and vendor software solutions.

This report should be read by any market participant trading in collateralized products, from repo to total return swaps to interest rate derivatives, to better understand why collateral management outsourcing is on the rise and how to capitalize on building efficient operational and treasury functions. It may also be useful reading for outsourcing providers to get a better sense of client feedback and upcoming growth prospects.

Table of Contents

• Executive Summary
• The Rationale for Collateral Management Outsourcing
• Who Will Need Outsourcing for Repo Clearing
• Provider Dynamics
• – Provider Directory
• Trends for 2025-2026
• About Finadium LLC