Meeting future challenges

Staffan Ahlner, is a senior vice president and the global head of Collateral+, a part of the funding and collateral solutions group at State Street.

From a State Street perspective, now that you have redefined your uncleared margin rules (UMR) offering and launched a tri-party service as part of your Collateral+ platform, what is next on the horizon?

Like our clients, we place strategic focus on collateral. We continue to invest in our business, consistent with our strategy to provide market leading infrastructure and holistic collateral services for our clients. We also continue to modernise and digitise our services as we know the most sustainable path forward is through technology.

Our teams and services are backed by several decades of experience and we are now executing our transformation strategy to better serve our clients. Our focus is on data management, automation and speed of execution to help our clients maximise their trading opportunities.

We will next increase our focus on front-to-back integration with funding and transformation trades, supporting peer-to-peer and buy-side to sell-side repo. Collateral+ is here to enable the trade.

A number of market participants have raised the upcoming challenges that will be presented by onboarding of UMR phase 6 clients. How are you approaching this?

As a financial institution, we have a lot to learn from the retail sector. In the institutional space, it can take months to onboard a client but in the retail space, it is done in minutes. While there are some differences in the challenges and requirements, we need to embrace technology to speed up change in this area.

State Street is investing in rapid onboarding of standardised businesses to give our clients the tools to effectively manage, add and change counterparties, agreements and relationships. Embracing digital solutions in the securities financing industry comes with organisational changes from front to back and for State Street that includes a change in approach and mindset when it comes to onboarding.

What is the future of collateral?

Effective collateral management is about managing data and having the ability to freely move assets. At State Street, we take a holistic view of collateral in order to break down the traditional silos that have developed between products, business units and entities. We also support the trend towards ‘treasury’ collateral functions on the buy-side, matching the centralised resource management approach that has developed on the sell-side.

With these trends, firms need to have access to real time data, the ability to execute on a change in collateral strategy by moving assets in real time between counterparts, access to funding, and transformation opportunities, whilst at any point in time being able to liquidate the collateral if required.

We will continue to see more pre-trade analytics enabling the full cost of the trade to be considered before execution. In recent years, we have seen scale being redefined - no longer is it about large notional, with new entities and types of firms entering the market. The demand now is to manage a larger number of entities with individual segregation requirements across multiple transaction types. Technology will continue to be a driver of change and with more partnerships in the collateral space, the efficiency of trading and financial resource usage will continue to evolve.

This article is part of the Collateral in 2022 Guide, and if you want to find more click here to download the guide.