21 September 2017
Reporter: Stephanie Palmer

SIX: Speedy settlement key in collateral management

Real-time settlement is the most important consideration when choosing a new collateral management provider, according to research from SIX Securities Services.

In a survey of industry professionals spanning the collateral and IT businesses, 83 percent said they consider real-time settlement as the most important factor when selecting a collateral management provider, while 75 percent said they consider collateral acceptance to important.

Real-time reporting was considered important by 63 percent, while 54 percent value flexibility with regards to regulatory changes.

A quarter of respondents said they consider transparency of collateral pools as an important point, regardless of where they’re published.

Only 21 percent named cost as an important factor in their decision.

Results differed slightly when comparing responses from the IT and collateral sides of the business.

While 100 percent of collateral respondents said they consider real-time settlement as a desired feature, only 73 percent of IT decision makers agreed.

Perhaps more notably, 56 percent of collateral respondents said they consider the point of transparency in collateral pools as extremely important, compared to just 7 percent of IT respondents.

Of all respondents, 40 percent said their organisation has either replaced or added a new collateral management provider in the last 18 months. A further 18 percent said they are in the process of doing so

Of those retaining their current collateral management provider, 61 percent said this is because of IT interfacing problems.

Some 55 percent said there was a complication element involved, and 55 percent cited the length of the onboarding process as a reason.

Marcus Harreus, head of clearing at SIX Securities Services, said: “Mobility of cash and securities is key in collateral management, especially in today’s economic environment. SIX Securities Services offers its clients an efficient and coherent market for securities clearing and settlement in Switzerland and the euro area.”

“With regulations such as Basel III (in particular liquidity coverage ratio) requiring banks to hold higher amounts of high-quality collateral (or cash), financial institutions are trying to cope with the reduced profitability of these positions by increase operational efficiency and by optimising their cash and collateral management capabilities.”

SIX Securities Services surveyed 60 professionals, with equal numbers from the collateral side of the business and IT decision makers, and with equal representation from the buy and sell sides. Respondents were from the UK, Germany, France, the Nordics and Switzerland.

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