The economic imperative for collateral optimisation has taken centre stage over the last decade, as the increased regulatory requirement for collateralisation of products has led to higher demand for the assets that underpin it. Whilst traditionally seen as back office function, the emergence of collateral as an asset class in its own right has led to significant investment across capital markets organisations as they attempt to price and optimise inventory.
But what has been less well understood is the cost opportunity that persists for many organisations through understanding their internal processes for collateral management and how those themselves can be optimised. With successive waves of regulation layering rapidly upon the industry – the IOSCO rules for uncleared margin, mandatory clearing, MSFTA requirements in the US – opportunities for reflection have been limited given the level and pace of change. So, whilst collateral optimisation has been a commercial focus for COO’s, process optimisation has not attracted the same level of interest.
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