Collateral Substitution and Reallocation

The 4sight collateral management solution helps to automate collateral substitutions and recalls. This allows collateral managers to deal with previously complex time-consuming manual processes more efficiently while controlling collateral costs in a dynamic real time manner.

The 4sight collateral system allows users to automate collateral recalls and substitutions in real time based on:

  • Corporate actions
  • Changes in the credit rating of pledged collateral leading to it becoming ineligible
  • Changes in counterparty and CCP eligibility criteria
  • Recall requests by underlying clients leading to a short position

The system can also help financial firms to optimise the pledged collateral portfolio by proposing collateral reallocations based on cheapest to deliver methodology.

The module allows users to choose whether to propose and book optimal collateral substitutions with one click, to multiple counterparts, within the same operational task as managing the recalls.

Alternatively, the system can book the recalls and returns first and then refresh the firm's exposures and collateral availability to include them. This allows the system to optimise all subsequent collateral movements later in the day, safe in the knowledge that the mandatory operational returns and recalls have already been processed.

CCP Collateral Substitutions

Typically, CCPs will request a start of day cash collateral movement to cover margining requirements. However, many CCPs will then allow clearing brokers/direct members to substitute pledged cash collateral with cheaper to deliver assets.

The 4sight collateral management solution can automatically propose suitable reallocations to reduce collateral costs and ensure the CCP is collateralised with the lowest cost collateral within its eligibility guidelines.

The 4sight collateral system can also receive an automated feed of collateral eligibility schedules from CCPs. When a CCP's eligibility schedules change and collateral pledged with the CCP becomes ineligible, the 4sight system can alert the user and propose substitutions.

Read more about CCP collateral management

Further Information

For further information on the 4sight Xpose system for Securities Lending, Repo and Derivatives collateral management or a product demonstration please Contact Us

Read about the latest developments in Collateral Management technology and collateral optimization techniques here.

Download a Collateral Optimisation Whitepaper

Read about the ROI on Collateral Optimisation Techniques

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