Collateral Management

Collateral Management, Europe, Re-Hypothecation, Regulatory, Repo, Securities Lending

collateral management, ESMA, Rehypothecation, Repo, Securities Lending

The European Securities and Markets Authority (ESMA) published today their expected “Guidelines on ETFs and other UCITS issues.” The document is the conclusion of several years worth of discussion on…

Sovereigns and OTC Derivatives Clearing: the rules are a mess. We look at an excellent paper from BNYM.

July 12, 2012

Basel III, CCP, Collateral Management, Derivatives, Europe, Regulatory, Wrong Way Risk

Bank of New York Mellon, Basel III, CCP, collateral management, Dodd-Frank, EMIR, OTC derivatives, Regulations

Recently Bank of NY Mellon (BNYM) published a paper “Sovereigns in Search of Solutions:OTC Derivatives Reform: Direct and Indirect Impacts” reviewing the dilemmas faced by banks when executing OTC derivatives…

Euroclear vs. Clearstream vs. Banks: whose model works best for collateral management?

July 11, 2012

Collateral Management, Europe

BNY Mellon, Central Securities Depositories, Clearstream, collateral management, CSDs, Euroclear, Iberclear, JPMorgan

Following Euroclear’s announcement of its “Collateral Highway,” the Battle Royale is on between Euroclear’s model, Clearstream’s model and what the banks have to offer for collateral management services. Everyone agrees…

Finadium: 2012 asset manager survey highlights CCPs, indemnification, collateralization for non-cleared derivatives

July 10, 2012

CCP, Collateral Management, Securities Lending

Asset Manager Survey, collateral management, Custody, Finadium, Securities Lending

Finadium has released its 2012 survey of large global asset managers and their opinions of securities lending, collateral management and custody. This 50 page report covers the attitudes of 38…

Another shoe drops: Basel Committee and IOSCO issue consultation paper on margin for non-cleared derivatives

July 9, 2012

Basel III, Collateral Management, Derivatives, OTC Derivatives Clearing

Basel Committee, Basel III, BCBS, collateral management, IOSCO, Margin, non-cleared derivatives, OTC derivatives

In a long expected move, the Basel Committee on Banking Supervision and IOSCO have issued a joint consultation paper, “Margin requirements for non-centrally-cleared derivatives – consultative document.” The main idea…

Singh and Stella on the velocity of collateral: banks just don't trust each other. We think there is more to it.

A July 2, 2012 post by IMF Economist Manmohan Singh and consultant Peter Stella in the blog Vox revisits a familiar topic: the velocity of collateral. We’ve written about this…

Finadium: Building a Culture of Collateral Management at US Asset Managers (free via SunGard)

June 27, 2012

Collateral Management

collateral management

Finadium has released a new report, Building a Culture of Collateral Management at US Asset Managers. The report presents the first part of Finadium’s 2012 asset manager survey and a…

Finadium: Impact of Moody's Downgrades on Securities Lending, Repo and Collateral Management

June 25, 2012

CCP, Collateral Management, Repo, Securities Lending

CCPs, collateral management, Moody's, Repo, Securities Lending

Finadium released a research note this morning summarizing the Moody’s downgrades on major financial institutions and presenting several expected outcomes for the securities lending, repo and collateral management industries. Continue…

Does it make sense to loosen the requirements of the Liquidity Coverage Ratio?

June 19, 2012

Basel III, Collateral Management, Liquidity Management, Regulatory

Basel III, Federal Reserve, LCR, Level 1 assets, Level 2 assets, Liquidity Coverage Ratio, Tarullo

The Wall Street Journal reported on Friday that global regulators were again talking about loosening up the rules that govern the Liquidity Coverage Ratio. This is the next round of…

OMGEO nails it on collateral optimization, joins SunGard and 4Sight

June 18, 2012

Collateral Management, Technology

collateral management, collateral optimization, technology

A press release from OMGEO today said that the firm had upgraded its ProtoColl product to include a holistic view of their collateral management needs. This is what the industry…

Fitch: Collateral Transformation Drives Central Clearing Risks

June 14, 2012

CCP, Collateral Management, Repo

CCP, collateral conversion, collateral transformation, Collateral upgrade, Fitch, Repo

Fitch posted some commentary today on their view of risks coming from the collateral transformation trade: The shift away from over-the-counter (OTC) derivative contracts toward clearing via central counterparties (CCPs)…

News on Basel III, money markets, Asian banks and more

June 11, 2012

Basel III, Collateral Management, Regulatory, Systemic Risk

Basel III, CCPs, collateral management, money market funds, Securitization, Shadow Banking

We’ve found so much important in the world of securities finance that today’s article needed to summarize the latest news. Topics include progress on Basel III, the Fed on money…

Shadow Banking not that Shadowy, says Cantor

June 4, 2012

Collateral Management, Liquidity Management, Repo, Tri-Party Repo

Cantor Fitzgerald, collateral, collateral management, Liquidity, Liquidity Management, Repo, Repo Conduits, Shadow Banking

An article in the June 1, 2012 Business Week by Jody Shenn and Lisa Abramowicz, “Cantor Plans to Enter Shrinking Shadow Banking”, took us by surprise. Cantor Fitzgerald is starting…

Artfully Dodging the Liquidity Coverage Ratio in Securities Lending and Repo.

May 29, 2012

Collateral Management, Liquidity Management, Regulatory, Repo, Securities Lending

Bank of England, Basel III, collateral management, ETFs, Federal Reserve, Finadium, LCR, Liquidity Coverage Ratio, Regulations, Repo, Securities Lending, Shadow Banking

Banks everywhere are focusing on the Liquidity Coverage Ratio (LCR) provisions in Basel III. The provisions don’t kick in until 2015, but the observation period is in full swing and…

More factors to consider on the direction of collateral transformation trades

May 24, 2012

collateral, collateral conversion, collateral enhancement, collateral management, collateral transformation, Collateral upgrade, Repo, Securities Lending

Collateral Management, Repo, Securities Lending

First it’s the next big thing, then its a red herring, then clearers say they don’t want to do it, and now securities lending agents and beneficial owners say they…

Collateral Transformation Trades for CCPs: Banks say "Sorry, we can't help you"

An article in Futures and Option World entitled “OTC Clearing IV: How to ease the collateral squeeze” (May 21, 2012) caught our eye. Most of it is the usual stuff on the…

Bank of New York Mellon targets DTC-cleared paper in the next step in tri-party reform. This one is going to hurt.

May 17, 2012

Collateral Management, Liquidity Management, Regulatory, Repo, Systemic Risk, Technology, Tri-Party Repo

Bank of New York Mellon, Basel III, collateral management, JP Morgan Chase, Liquidity, Repo, tri-party repo

Bank of New York Mellon (BNYM) has told their tri-party customers about the next step in reducing the systemic risk….and some market players fear it will create some nasty unintended…

The rise and fall of "Safe Assets"

May 16, 2012

Basel III, CCP, Collateral Management, Liquidity Management

CCP, collateral management, Liquidity Coverage Ratio, Nomura, safe assets

From Nomura, by way of businessinsider.com comes a nice graphic showing the growth and falloff in “safe assets”. We have written before about the double squeeze in the market for…

Central Securities Depositories and the business of collateral management

May 14, 2012

Collateral Management, Regulatory

Central Securities Depositories, collateral, collateral management, CSDs

Finadium has released a report on Central Securities Depositories and the business of collateral management. Central Securities Depositories (CSDs) have traditionally focused on the business of custody as background utilities…

Moody's Downgrade Watch: What Will the Buy-Side Do?

May 10, 2012

Collateral Management, Derivatives, Liquidity Management, Repo

2a-7 funds, Downgrade, Moody's, Regulations, Repo, sec, Wholesale Funding

The likelihood that Moody’s will downgrade bank debt in the coming weeks and months is bad news for the banks themselves. But we would like to look at the other…

The coming Moody's bank downgrades: funding and collateral will feel the heat

May 9, 2012

Collateral Management, Derivatives, Liquidity Management, Repo, Systemic Risk, Wrong Way Risk

Bank of America, Citibank, collateral management, Federal Reserve, Finadium, Moody's, Morgan Stanley, OTC derivatives, Repo, Wholesale Funding

Moody’s is reviewing 17 global banks for downgrades that may come as early as June. The news is starting to fill with stories on how much extra collateral banks will…

Pro-cyclicality and repo: do regulators understand how haircuts are determined?

May 3, 2012

CCP, Collateral Management, Regulatory, Repo, Systemic Risk, Tri-Party Repo, Wrong Way Risk

CCP, collateral management, Europe, Finadium, LCH.Clearnet, MF Global, Repo, tri-party repo

Pro-cyclicality is every regulator’s favorite whipping boy right now. Regulators pound the table over ways to offset the tendency to ease financing terms when the market is strong, only to…

BofE's Tucker may turn the tri-party repo market upside-down

May 2, 2012

Collateral Management, Regulatory, Repo, Tri-Party Repo

Bank of England, collateral management, Finadium, Paul Tucker, Shadow Banking, tri-party repo

On Monday we wrote about the speech given on April 27th by Paul Tucker “Shadow banking: thoughts for a possible policy agenda.” Mr. Tucker is Deputy Governor of the Bank…

LCH.Clearnet to buy International Derivatives Clearing Group, putting another piece in the clearing puzzle

April 26, 2012

Collateral Management, Derivatives, OTC Derivatives Clearing, Repo

CME, FICC, International Derivatives Clearing Group, LCH.Clearnet, New York Portfolio Clearing, NYSE Liffe

LCH.Clearnet has announced they are negotiating to buy the International Derivatives Clearing Group (IDCG) from Nasdaq OMX in an all stock deal. The clearinghouses have signed a non-binding agreement, but…

The CME is now accepting corporate bonds as collateral for OTC derivatives…we have some questions

April 18, 2012

Collateral Management, Derivatives, OTC Derivatives Clearing, Regulatory, Tri-Party Repo, Wrong Way Risk

CCP, CME, collateral management, Dodd-Frank, OTC derivatives, Regulatory, tri-party repo

As of April 13, 2012 the CME has started accepting corporate bonds as collateral for cleared OTC Interest Rate Swaps. We have been thinking about the CME criteria for accepting…

The Supply of Safe Assets: the Other Side of the Equation

April 16, 2012

CCP, Collateral Management, Derivatives, Repo

CCP, Finadium, Global Financial Stability Report., IMF, Repo, Shadow Banking

The recent IMF Global Financial Stability Report has gotten us thinking more about the dynamics of safe assets. This blog has written extensively about the demand for safe assets (primarily…

The IMF's Global Financial Stability Report looks at coming collateral shortages

The IMF just released part of the Global Financial Stability Report. Chapter 3 is entitled “Safe Assets: Financial System Cornerstone?” and it has a lot to chew on. The two…

The wickedly slippery slope of new collateral acceptance

April 11, 2012

CCP, Collateral Management, Derivatives, OTC Derivatives Clearing, Regulatory

BNY Mellon, CME, collateral management, Corporate Bonds, FCMs, OTC derivatives clearing

BNY Mellon lowered the practical, operational boom today on a new round of collateral acceptance for Futures Commissions Merchants (FCMs) on the CME. The CME had announced the acceptance of…

"When Collateral is King": An Important Research Paper from Credit Suisse

April 9, 2012

Collateral Management, Repo

collateral management, Federal Reserve, Lehman, Regulations, Regulatory, Repo, Shadow Banking

How could a paper called “When Collateral Is King” not attract our attention? It is from Credit Suisse’s Global Strategy Research, published on the March 15, 2012 (a/k/a the Ides…

Cleaning up repo-to-maturity accounting (and adding liquidity risk reporting too)

March 29, 2012

Collateral Management, Liquidity Management, Regulatory, Repo

FASB, Repo, repo to maturity

In US Congressional testimony yesterday, Susan Cosper, Technical Director of the Financial Accounting Standards Board, discussed the FASB’s intention to change repo-to-maturity accounting procedures in order to avoid future loopholes.…

Is collateral optimization the next big thing?

March 21, 2012

Collateral Management, Liquidity Management

collateral management, collateral optimization

It is safe to say that professionals working in securities finance, liquidity and related fields know that collateral management is a major priority for 2012, and a large portion of…

The battle of the clearinghouses is on: LCH.Clearnet versus the CME

March 19, 2012

CCP, Collateral Management, Derivatives, OTC Derivatives Clearing, Regulatory, Repo

Basel III, CCP, Clearing, CME, collateral management, Dodd-Frank, LCH.Clearnet, OTC derivatives, Regulations, Repo

The battle of the clearinghouses is on. The key to success is the ability to minimize collateral dislocation by managing margin exposure by portfolio. To do this, clearinghouses must go…

Looking at new ways to manage margin: a central depository

March 14, 2012

CCP, Collateral Management, Derivatives, OTC Derivatives Clearing, Tri-Party Repo

CCP, collateral management, derivatives, OTC derivatives, Rivast, tri-party repo

A paper, “The possible impact of OTC derivatives central clearing on counterparty risk” (draft, March 9, 2012), from David Murphy of UK consultancy Rivast caught our eye recently. The bulk of…

Bloomberg: Basel Group to Consider Fine Tuning of Draft Bank Liquidity-Rule Changes

March 12, 2012

Basel III, Collateral Management, Liquidity Management, Regulatory

Basel III, LCR, Liquidity Coverage Ratio

A global banking regulator has said that the Basel Committee for Banking Supervision is planning to consider these same changes at its meeting on March 20-21. Finadium has released a…

Finadium: corporate bonds and equities gaining as high quality assets

March 11, 2012

Basel III, Collateral Management, Liquidity Management, Regulatory, Repo, Securities Lending

Basel III, High-Quality Liquid Assets, HQLA, LCR

A new report from Finadium released today looks at the growth of corporate bonds and equities as high quality assets for bank balance sheets and as collateral. The possibility has…

What does Liquidity mean for repo-style transactions? An appeal to readers for help

March 8, 2012

Basel III, Collateral Management, Regulatory, Repo

Basel III, collateral, Repo

Readers, we ask for your help in this post to solve a complex matter: how do you define liquidity for repo-style transactions under Basel III? If you are able to…

BIS: dealers have enough collateral for initial margin on centrally cleared OTC derivatives

March 7, 2012

CCP, Collateral Management, OTC Derivatives Clearing, Regulatory

BIS, CCPs, collateral management

A new research report from the Bank for International Settlements says that banks have enough unencumbered assets to meet initial margin on newly cleared OTC derivatives but may need to…

CCPs and Legally Separated Operationally Commingled collateral: one step forward, one step backwards

March 6, 2012

CCP, Collateral Management, Derivatives, OTC Derivatives Clearing

CCP, collateral management, Finadium, Lehman, OTC derivatives

On February 29th we posted about the CFTC hearing on collateral custody and segregation of client accounts. One of the things mentioned was the acceptance of Legally Separated Operationally Commingled…

Fed says not so fast to Fitch's research saying riskier assets making a come back in repo

March 1, 2012

Collateral Management, Repo, Tri-Party Repo

Federal Reserve Bank of New York, Fitch, Repo, tri-party repo

A post on the New York Fed’s Liberty Street Economics blog by Antoine Martin caught our eye. Entitled “Is Risk Rising in the Tri-Party Repo Market?” it refutes a research…

ECB freezes Greek bonds as collateral while ISDA may meet on CDSs: has the time finally come?

February 28, 2012

collateral management, European Central Bank, Greece

Collateral Management, Derivatives, Repo

As S&P has announced Greece’s debt to be in selective default, the dominos are starting to fall one by one. The Wall Street Journal reports that the European Central Bank…

Reuters: ECB LTRO ready to close up shop

February 22, 2012

Collateral Management, Liquidity Management, LTRO, Regulatory

ECB, Liquidity, LRTO

With already half a trillion Euros out the door and another half a trillion expected to go, The European Central Bank is ready to close up shop on its LTRO…

“Leverage and Asset Prices: An Experiment”: A new paper from the Federal Reserve Bank of New York

February 12, 2012

Collateral Management

Federal Reserve, Repo, Securities Lending

A Staff Paper was just released by the Federal Reserve Bank of New York with the auspicious title “Leverage and Asset Prices: An Experiment”. The authors are Marco Cipriani, Ana…

AcadiaSoft gains ground with its MarginSphere tool

February 9, 2012

Collateral Management, Technology

collateral management, technology

When we spoke with AcadiaSoft almost three years ago, we weren’t entirely sure that there was a success story waiting in the wings there. Other collateral management technology firms that…

From the ERC a new paper, "Haircuts and initial margins in the repo market"

February 8, 2012

Collateral Management, Re-Hypothecation, Regulatory, Repo, Systemic Risk, Tri-Party Repo, Wrong Way Risk

CCP, European Repo Council, ICMA, Lehman, Leverage, Repo

The European Repo Council, part of ICMA, came out with an interesting paper today, “Haircuts and initial margins in the repo market”. It was authored by Richard Comotto, Senior Visiting Fellow…

Some musings about the IMN Beneficial Owners Securities Lending Conference

February 3, 2012

Beneficial Owners, CCP, collateral management, collateral transformation, Collateral upgrade, Dexia, Finadium, General collateral lending, IMN International Beneficial Owners' Securities Lending Summit, Intrinsic value lending, Liquidity Coverage Ratio, Securities Lending

CCP, Collateral Management, Liquidity Management, Securities Lending

There were lots of interesting comments made on various panels at the conference. Here are some that resonated. Not being able to write as fast as panelists can speak, much…

The no-spread treasury trade in securities lending

January 31, 2012

Collateral Management, Securities Lending

collateral management, Securities Lending, treasuries

Spreads on US treasuries in securities lending are so thin that even the most stalwart securities lending participant has to wince. We see client evidence that in some months collateral…

"Collateral Crises": a new research paper examines the impact of small shocks that create big problems

January 27, 2012

Collateral Management, Systemic Risk

Credit Markets, Gary Gorton, Great Moderation, Guillermo Ordoñez, information insensitive, sub-prime

From Yale economists Gary Gorton and Guillermo Ordoñez comes an important, albeit highly technical, paper entitled “Collateral Crises.” The idea of the paper is to look at how crises get…

More on collateral upgrades and collateral mismatch

January 26, 2012

collateral conversion, collateral management, collateral transformation, Collateral upgrade, Liquidity Management, Repo

Collateral Management, Prime Brokerage, Repo, Securities Lending

On January 20th we posted “Is the collateral upgrade trade a red herring?“. This isn’t the first time we have written about the complexities of collateral swaps. Last October we…

US plan sponsors look to alternative repo – SLT

January 24, 2012

Collateral Management, Repo, Securities Lending

collateral management, Finadium, Repo, Securities Lending