Collateral Management

Collateral Management, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured, 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, Featured

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, Featured, 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, Featured, 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, Featured, 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

US plan sponsors are starting to look closer at alternative repo products as a solution to the challenges they face in securities lending and collateral management programmes, according to the…

EU may allow European asset-backed securities to be included as liquid assets for the liquidity coverage ratio. France & Germany push for delay to 2018, much to the chagrin of the UK.

January 23, 2012

Collateral Management, Featured, Liquidity Management, Repo

Basel III, collateral management, Europe, Finadium, LCR, Liquidity Coverage Ratio

An article in Bloomberg on January 20, 2012 by Esteban Duarte caught our eye. The reporter wrote that the EU may allow European asset-backed securities (ABS) to be included as…

Is the collateral upgrade trade a red herring?

January 20, 2012

CCP, Collateral Management, OTC Derivatives Clearing, Repo, Securities Lending

CCPs, collateral transformation, Collateral upgrade, OTC derivatives, Securities Lending

A panelist at the Clearstream global securities financing conference said this yesterday in Luxembourg, and while deliberately poking at the current groupthink, he had a real point. There is current…

Nine takeaways from the Clearstream Global Securities Financing conference regulatory panel

January 18, 2012

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

Europe, Financial Stability Board, Regulations, Repo, Securities Lending

Clearstream is holding its 16th annual global securities financing conference in Luxembourg these days with over 800 attendees. Today’s regulatory panel was very interesting, especially the views of regulators that…

Lombard up, Algorithmics down in collateral management IT

January 12, 2012

collateral management, technology

Collateral Management

Recent conversations with four collateral management professionals suggest that Lombard Risk is on the upswing but Algorithmics’s version 5 of their collateral management solution is on the downturn. Even so,…

When every bps counts, securities lending and collateral management take on a new meaning

January 11, 2012

Collateral Management, Securities Lending

collateral management, Securities Lending

Russell Investments will soon put on a webinar called In a low-return environment, every basis point counts. While the presenters are focused on their ability to add returns from principal…

Now everyone is a repo trader

As our first post of the year, it is appropriate to come back to one of our common threads: collateral. The WSJ article from Dec. 29, 2011 “Europe’s Banks Face…

Has MF Global Revealed a Fatal Flaw in CCP Margin Procedures? An Analysis of MF Global’s Margin Failure

December 20, 2011

CCP, Collateral Management, Liquidity Management, Regulatory, Repo

Additional Margin, collateral management, Euro Sovereign Debt, LCH.Clearnet, Liquidity, MF Global, Regulations, Repo

A closer analysis of the reasons for MF Global’s failure reveals that subtle decisions at the heart of how repo contracts are cleared in Europe may have contributed to the…

A Serious Conversation About Sovereigns Posting Collateral, At Last

December 16, 2011

Collateral Management, OTC Derivatives Clearing, Regulatory

collateral management, OTC derivatives, sovereign risk

Emerging from behind the smokescreen of “sovereigns have no risk,” the OECD is promoting the idea that governments and government agencies should debate posting collateral for their OTC derivatives like…

Financial taxes, seclending and haircuts in the repo market

December 14, 2011

Collateral Management, Regulatory, Repo, Securities Lending

Europe, Regulations, Repo, Securities Lending

Two interesting news reports today on the impact of the EU’s financial transaction tax on securities lending and haircut trends in the repo market. Continue reading

The Latest on ETFs, Securities Lending and Collateral

December 12, 2011

Collateral Management, Securities Lending

collateral management, ETFs, Securities Lending

From Financial News, but readers beware: this article repeats some semi-accurate facts about securities lending and collateral management that perpetuate in the market. Can you spot the misleading comments? Let…

What Too Big to Fail Means in the Tri-party Repo Market

December 8, 2011

Collateral Management, Featured, Repo, Tri-Party Repo

collateral management, Repo, tri-party repo

What happens if a major issuer of repo defaults? This question comes up as the November Federal Reserve tri-party data remind us that the repo market is highly concentrated. For…

Repo in 2012: high quality paper scarce, risker paper increasingly harder to fund

December 6, 2011

CCP, Collateral Management, Liquidity Management, Regulatory, Repo

CCP, collateral conversion, collateral management, collateral transformation, ECB, Europe, Repo

Three recent posts on FT Alphaville all point in a similar direction. If you connect the dots on these cautionary tales, 2012 is going to be a difficult year in securities…

Successful strategies for collateral management in the age of CCPs: report

December 1, 2011

CCP, Collateral Management

CCPs, collateral management

According to a new report written by Finadium and sponsored by OMGEO, the collateral management market continues to evolve as more regulations become finalized and asset managers, insurance companies and…

FT Alphaville: One man’s haircut is another man’s unsecured risk

November 28, 2011

CCP, Collateral Management, Derivatives, Featured, Repo, Securities Lending

CCP, Lehman, Leverage, Liquidity, Repo, Securities Lending

In a November 25, 2011 post in FT Alphaville, Izabella Kaminska points out that there is a flip-side to the collateral conundrum: excessive over-collateralization. The post notes that according to Richard Comotto,…

Satyajit Das, author ‘Extreme Money: The Masters of the Universe and the Cult of Risk’ talks to the FT on CCPs

November 22, 2011

CCP, Collateral Management, Derivatives, Featured, OTC Derivatives Clearing, Regulatory, Systemic Risk

Basel III, CCP, collateral management, derivatives, Finadium, OTC derivatives, Shadow Banking

Satyajit Das , the author of recently published ‘Extreme Money: The Masters of the Universe and the Cult of Risk’ has been giving interviews in support of his book. We think…

Lombard Risk gets good press – look for others in the collateral management space as well

November 17, 2011

collateral management, technology

Collateral Management