Increasing inventory mobility across a fragmented marketplace

In this paper, Bridging the Collateral Divide, BNY Mellon and Euroclear examine the contours of the global collateral marketplace and explore ways to improve it for all participants. We believe that harmonisation of processes would significantly reduce fragmentation and enable increased mobility in international collateral management.

Given our different vantage points, we are uniquely positioned to see activity occurring today that is suboptimal for users of the marketplace. That has enabled us to identify several aspects of the current structure that all market participants, operators and end users alike might wish to change in order to have collateral usage be more efficient and effective. Given the focus on the optimisation of financial resources across the industry, we think it is timely to provide our perspective and to try to start the conversation in order to help initiate change.

Our analysis suggests there is potential for increased efficiencies in the deployment of collateral if there is greater industrywide standardisation and a more holistic approach to the efficient deployment of collateral.

This paper concludes by outlining a number of steps that stakeholders in the collateral management industry could commence work on to harmonise the collateral landscape and increase market efficiency.

This joint report by Euroclear and BNY Mellon shares for the first time an analysis of the collateral businesses of the world’s two largest collateral infrastructure providers. This analysis – which was conducted by PwC in 2019 –  was undertaken to broadly understand the potential for enhanced collateral usage. It examines the number of common collateral clients between the two firms, the types of securities these clients are holding as collateral assets and the financing activity this collateral is being used to support, such as repo, securities finance and OTC derivatives transactions.

more whitepapers

“Through market intelligence and industry engagement, we can tackle the issue of collateral fragmentation in order to drive market efficiencies.”

Jo Van de Velde
Head of Group Strategy and Product Expansion