Best Practices and Technologies For Ecosystem Optimization

Celent as released a new report titled Collateral Mgmt 2017: Best Practices and Technologies For Ecosystem Optimization . The report was written by Cubillas Ding, a Research Director with Celent’s Securities & Investments practice.

Collateral becomes an asset class in itself and its value chain is undergoing rapid reconstruction through industry initiatives and FinTech offerings.

Collateral management activities are entering the next stage of development – beyond firm-level infrastructure and data enablement alone; towards market participants as a whole looking to connect and optimize pools of collateral on an industrywide basis.

Recent times have seen significant changes in terms of startup firms and market infrastructure players offering services that help firms discover, aggregate, optimize, align and mobilize collateral flows and its value chain at a price/ performance-point that enables all market participants in the ecosystem to potentially benefit. Firms now are able to pursue multi-pronged approaches to achieve next generation capabilities to manage and optimize their collateral operations.

Exhibit: Collateral Value Chain: Solutions and Service Providers

Cloud delivery is already reducing barriers to entry to industrialized collateral management infrastructures. Celent anticipates that collateral management will follow a similar trajectory to customer relationship management (CRM) systems. Just as Salesforce changed CRM, next-generation solutions based on cloud configurations offer a more compelling price point advantage over incumbent solutions without necessarily sacrificing significant levels of functionality.

“Looking forward, firms will grapple to manage the economics of collateral and margining having a direct impact on operational overheads, cash and asset balances, liquidity, and longer-term portfolio returns. The question will no longer be, ‘do I need to optimize?’ but rather ‘what degrees of optimization should I pursue?,” commented Cubillas.

“We are seeing new options and avenues becoming available: Emerging areas such as next generation pre-trade (collateral) decisioning analytics, multilateral collateral sourcing/ trading venues, and nascent ‘collateral on blockchain’ initiatives – all could be game changers, especially when they are aligned and connected. A new future is being constructed, perhaps sooner than we expect,” he added.