Collateral Management Technology Vendor Survey 2021 From Finadium Features Transcend

Finadium featured Transcend in a new survey on Collateral Management Technology Vendors in 2021. The survey presents an inside look at the technology vendors who are leading the future of collateral technology – and the incredible feats clients can accomplish with them.

Finadium profiles Transcend as a solution to manage collateral, funding, and liquidity within distinct business lines and across the enterprise. By connecting data and processes across disparate systems, Transcend’s holistic solutions help clients run sophisticated analytics, optimization and automation.

“Transcend was purpose-built to provide the most advanced post-trade collateral optimization capabilities in the industry.”

– 2021 Finadium Collateral Management Technology Vendor Survey

Finadium subscribers can download the survey to learn more about Transcend’s role in driving more effective collateral management and collateral optimization, as well as some new functionality recently added to the Transcend platform.

Learn More About Transcend

Transcend empowers financial institutions to maximize enterprise-wide financial performance and
operational efficiency. Through real-time global inventory and collateral management and optimization
solutions, Transcend helps clients manage intraday liquidity, funding and regulatory requirements.
With seamless workflows that connect front office decision-making with back office operations,
Transcend’s innovative technology promotes smarter investment decisions and improved financial
performance.

Contact the Transcend team for more information on our fully integrated suite of solutions.

Collateral Benchmarking Checklist: How Does Your Firm Compare?

When it comes to collateral and inventory optimization, how do you know how your firm stacks up to industry best practices? How can you benchmark your progress, and importantly, pinpoint opportunities to solve inefficiencies? 

Download Transcend’s Collateral Benchmarking Checklist and get a quick one-page snapshot to compare your firm’s funding, liquidity, optimization and risk capabilities to industry leaders. 

The Transcend team would be happy to walk you through your assessment and discuss how to prioritize your optimization strategy to drive better results for your business – and in the shortest possible timeframe.

Transcend raises $10mn Series A round from fintech VC Nyca and a global custodian bank

Transcend, a leader in business optimization for financial firms, has closed its Series A financing, limiting the raise to $10 million after over-subscription by potential investors. The financing round was led by Nyca Partners, a leading fintech venture capital firm, with support from a major global custodian bank. Proceeds will be used to rapidly scale product and sales infrastructure to meet growing demand from Transcend’s client base, which has more than doubled in the past two years to include 10 of the world’s largest banks and brokerage firms.

Transcend’s rapid growth corresponds to a sharp increase in collateralized businesses looking to more efficiently deploy cash and securities across their firms. This is particularly important given a series of recent capital, liquidity and regulatory drivers, such as the uncleared margin rules for bilateral derivatives trading. These changes require significant upgrades in the capabilities and infrastructure of many firms, such as connecting siloed internal platforms and developing critical common capabilities, to remain competitive and compliant.

Access Finadium’s full article

Transcend secures $10m funding to finance EU growth

Transcend Street has raised $10 million in a Series A financing round led by Nyca Partners, a fintech venture capital firm, which will facilitate the US firm’s growth in Europe, as well as new product offerings.
The funding round was also completed with support from an unnamed major global custodian bank.

The collateral optimisation solutions provider says it has allocated the funds to capitalising on its recent growth in clients, headcount and product offerings, as well as further pursuing its ambition to become a key service provider to the buy-side community.

This regional growth includes the opening of Transcend’s first European office in the first half of 2021 and the formation of a local team to service its growing stable of EU-based clients.

Access Securities Lending Times’s full article

Transcend to use fundraising to upscale collateral management services for custodians

New York FinTech Transcend is aiming to significantly upscale its collateral management solutions for custodians and investment banks following a $10 million fund raising round.

The financing round was led by FinTech venture capital firm Nyca Partners, with the support of an undisclosed global custody bank.

Transcend, founded by the former global head of prime finance, futures and OTC clearing technology at Citi, aims to use the new funding to rapidly scale collateral management product and sales infrastructure for custodian banks and prime brokers.

“Our investors and clients share our vision for industry transformation,” said Bimal Kadikar, CEO of Transcend. “As a team, we are not alone in believing that analytics, optimisation and automation can provide a significant competitive advantage for firms’ funding and liquidity challenges. This investment will enable us to accelerate our global ambition and target our solutions across a range of sell-side and buy-side stakeholders.”

Access Global Custodian’s full article

Transcend raises $10 million in first round

Our CEO Bimal Kadikar spoke with Oliver Wade at Global Investor Group about the Company’s recent success:

Transcend has raised $10 million (£7.7 million) in its Series A financing as it looks to meet rising demand from its growing client base, which has more than doubled in the past two years.

The financing round was led by Nyca Capital, a specialist fintech venture capital firm, and was followed by support from a global custodian bank who wished to remain anonymous.

Speaking to Global Investor, Bimal Kadikar, CEO of Transcend, said: “From the outset of our Series A funding, we were primarily looking to find partners that would complement our business. It would have been relatively easy to have raised more money as almost all of the 10 or so venture capital firms we spoke to came back and said they wanted to invest in the business, but there wasn’t enough room in this round.”

Click here to view the full article

Transcend Raises $10 Million to Meet Surge in Demand for Optimization of Collateralized Businesses

Transcend, a leader in business optimization for financial firms, has closed its Series A financing, limiting the raise to $10 million after over-subscription by potential investors. The financing round was led by Nyca Partners, a leading fintech venture capital firm, with support from a major global custodian bank. Proceeds will be used to rapidly scale product and sales infrastructure to meet growing demand from Transcend’s client base, which has more than doubled in the past two years to include 10 of the world’s largest banks and brokerage firms. 

Transcend’s rapid growth corresponds to a sharp increase in collateralized businesses looking to more efficiently deploy cash and securities across their firms. This is particularly important given a series of recent capital, liquidity and regulatory drivers, such as the uncleared margin rules for bilateral derivatives trading. These changes require significant upgrades in the capabilities and infrastructure of many firms, such as connecting siloed internal platforms and developing critical common capabilities, to remain competitive and compliant.

“Our investors and clients share our vision for industry transformation,” said Bimal Kadikar, CEO of Transcend. “As a team, we are not alone in believing that analytics, optimization and automation can provide a significant competitive advantage for firms’ funding and liquidity challenges. This investment will enable us to accelerate our global ambition and target our solutions across a range of sell-side and buy-side stakeholders.”

“We’ve been impressed by the strategic thinking of Bimal and the Transcend team for many years, especially in developing solutions for complex business areas like collateral and funding optimization. We are convinced that Transcend’s innovative solutions will deliver large-scale benefits for financial firms and will help them improve their competitiveness.” said Hans Morris, managing partner at Nyca.

Transcend was formed in 2013 by seasoned financial executives to make collateral and liquidity management at banks and counterparties more profitable and efficient. Its scalable technology works with a firm’s existing infrastructure to address specific business-level or enterprise-wide challenges. 

ABOUT TRANSCEND
Transcend is a leading provider of optimization solutions for collateralized businesses. With a growing roster of world-class banks and other financial institutions as clients, the firm is poised to become the gold standard for the real-time, firm-wide management of inventory, funding and liquidity. With more than 75 employees globally, Transcend addresses an array of regulatory and capital challenges that are facing the industry with a user-friendly, SaaS-based or on-prem collateral and liquidity management platform. For more information, visit transcendstreet.com.

The Next Level in Building Data-Driven Operational Efficiency

The next level of operational efficiency will incorporate a deep view of connected data within organizations that will yield better efficiencies and optimization of capital through firm-wide decision making. Taking automated action on those decisions for Straight-through Processing will enable firms to achieve the desired efficiencies in a scalable manner. Getting there has its challenges, however. In this article we look at why many in the industry are embarking on this more sophisticated approach to operational efficiency, and identify three key strategies for ensuring success. A guest post from Transcend, originally published in Securities Finance Monitor.

Continue reading “The Next Level in Building Data-Driven Operational Efficiency”

In five years, 90% of funding will be done by machines

You may disagree with the number of years or the percent, but everyone understands that automation in the funding and collateral space is occurring at a fast pace. The question is how you prepare for this inevitable future? Our view is that connecting data from disparate sources is the key to the next evolution in the funding markets. A guest post from Transcend.

Who in the capital markets industry isn’t seeking greater profitability or returns? From balance sheet pressures and competitive dynamics to more resources to comply with regulation, focusing on transformative change to advance the firm has been a huge challenge. At the same time, technology is evolving at a rapid pace and the availability of structured and unstructured data is presenting a whole new level of opportunities. For firms to realize this opportunity, connecting disparate data and adopting smart algorithms across the institution are a critical part of any strategy.

Advances in technology have allowed data to be captured and presented to traders, credit, regulators, and operations. But right now, most data are fragmented, looking more like spaghetti than a coherent picture of activity across the organization. Individual extracts exist that sometimes cross silos, but more often cannot be reconciled across sources or users. To be effective, data needs to flow from the original sources and be readable by each system in a fully automated way. It does not matter if individual systems are old or new, in the cloud or behind firewalls, from vendor packages or in-house technology: they all have to work together. We call this connected data.

Businesses have understood for some time that this will require growth of automation, which will be a critical driver of success. Banks and asset managers know that they have to do something: doing nothing is no option at all. Machine learning and artificial intelligence are part of the solution, and firms have embarked on projects large and small to enable automation under watchful human eyes. The new element to consider in the pace of change is the ability of machines to connect, process and analyze data within technology platforms for exposure management, regulatory reporting and pricing. The more data that feeds into technology on the funding desk, the more that automated decision-making can occur.

While individual systems and silos can succeed on their own, a robust and integrated data management process brings the pieces together and enables the kinds of decision-making that today can only be performed by senior finance and risk managers. Connected data is therefore possibly the most important link between automation and profitability. It is a daunting task to consider major changes to all systems that are in play, but most firms are adopting a strategy to build a centralized platform that brings data from multiple businesses and sources. A key benefit of this strategy is that advances in technology and algorithms can be applied to this platform, enabling multiple businesses or potentially the whole enterprise to benefit from this investment.

The risk of inaction

Connected data can stake its claim as the new, most competitive advantage in the markets. Like algorithmic trading and straight-through processing, which were once novelties and are now taken for granted, the build-out of a connected data architecture combined with the tools to analyze data will initially provide some firms with an important strategic advantage in cost and profitability management.

With all the talk about data, there is an important human element to what inaction means. In a data-driven, technology-led world, having more or all the right people will not stop a firm from being left behind, and in fact may become a strategic disadvantage. The value of automation is to identify a trade opportunity based on its characteristics, the firm’s capital and the current balance sheet profile. Humans cannot see this flow with the same speed as a computer, and cannot make as fast a decision on whether the trade is profitable from a funding and liquidity perspective. While the classic picture of a trader shouting across a room to check whether a trade is profitable makes for a good movie scene, it is unwieldy in the current environment. A competitor with connected data in place can make that decision in a fraction of the time and execute the trade before the slower firm has brought the trade to enough decision-makers to move forward.

The competitive race towards connected data means that firms with more headcount will see higher costs and less productivity. As firms with efficient and automated funding decision tools employ new processes for decision-making, they will gain a competitive advantage due to cost management, and could even drive spread compression in the funding space. This will put additional pressure on firms that have stood still, and is the true danger of inaction at this time.

Action items for connected data

Data is only as good as the reason for using it. Firms must embark on connecting their data with an understanding of what the data are for, also called foundational functionality. This is the initial building block for what can later become a well-developed real-time data infrastructure.

Each transaction has three elements: a depository ladder for tracking movements by settlement locations; a legal entity or trading desk ladder; and a cash ladder. Each of these contain critical information for connecting data across the organization. If your firm has a cross-business view of fixed income, equities and derivatives on a global basis, then you are due a vacation. We have not yet seen this work completed by any firm, however, and expect that this will be a major focus for banks through 2019 and 2020.

Ultimately, an advanced data infrastructure must provide and connect many types of data in real-time, such as referential data, market data, transactions and positions. “Unstructured” data, such as agreements and terms, capital and liquidity constraints, and risk limits, must also be available more broadly for better decision-making, despite their tendency to be created in some specific silo. But an important early step is ensuring visibility into global, real-time inventory across desks, businesses, settlement systems and transaction types; this is critical to optimize collateral management. Access to accurate data can increase internalization and reduce fails, cutting costs and operational RWA. This is especially important for businesses that have decoupled their inventory management functionality over time, for example, OTC derivatives, prime brokerage and securities financing. Likewise, the ability to access remote pools of high-quality assets, whether for balance sheet or lending purposes, can have direct P&L impacts.

Step two is the development of rules-based models to establish the information flows that are critical to connecting data across a firm and simultaneously optimizing businesses on a book, business entity, and firm levels. The system must understand a firm’s flows and what variables they need to monitor and control within a business line and across the firm. Data will push in both directions, for example to and from regulatory compliance databases or between settlement systems and a trader’s position monitors. Rules-based systems simplify and focus on what is otherwise a very complex set of inter-related and overlapping priorities (see Exhibit 1).

Connected data can enable significant improvements such as:

  • Regulatory models can be fed on a real-time pre-trade “what-if scenario” so businesses can know how much a particular trade absorbs in terms of capital, liquidity or balance sheet for the given return, or if a trade is balance sheet-, capital- or margin-reducing.
  • Data can feed analytics that tells a trader, salesperson, manager or any stakeholder what kind of trades they should focus on in order to keep within their risk limits, with information on a granular client level.
  • XVA desks, the groups often charged with balancing out a firm’s risk and capital, can not only be looped in but push information back to a trader in real-time so they can know the impact of a trade.
  • Systems that track master agreements can be linked and analytics can point toward the most efficient agreement to use for a given trade.
  • Trading and settlement systems can interface with market utilities, both backward and forward.
  • Transfer pricing tools can be built into the system core and be transparent to all stakeholders with near instantaneous speed, at scale.

Transcend’s recent experience with some of the top global banks shows the value of consolidating data into one infrastructure. We are connecting front- and back-office to market infrastructure and providing information in a dashboard, in real-time. As trades book on the depository ladder, key stakeholders can see the change in their dashboard application and can make decisions on funding manually or feedback new parameters to pricing models across the enterprise. The same transaction and positions affect the real-time inventory view from legal entity or customer perspectives as well as driving cash and liquidity management decisions. Over time, as banks get more comfortable with their data management tools, parts of decision-making that follow specific rules can be automated. This will be an excellent deployment of the new data framework.

Betting on the time or the percent

As machine learning and AI advance, and connected data becomes more of a reality, technology platforms will learn how to efficiently mine and analyze data to understand if a trade satisfies institutional regulatory, credit, balance sheet, liquidity, and profitability hurdles. This will lead to an environment where a trade inquiry comes in electronically, is accepted or rejected, and processed automatically through the institution’s systems. The steps in this process are methodical, and there is nothing outside of what financial institutions do today that would prevent execution. A reduction in manual intervention can allow traders to focus on what is important: working on the most complex transactions to turn data into information and action.

The fact that more automation is occurring in funding markets is certain. The question at this time is how long will it take to automate most of the business. This is a bet on the timeline or the percent to which funding decisions can be automated but not the direction of the trend line. Could it be as much as 90% in five years? Answers will vary by the firm and some of the major players are already developing strategies to progress in this direction. Typically, people overestimate the impact of a new technology in the short term, but underestimate the impact in the long term. Banks have already invested in machine learning and AI tools to make automated funding a reality. But it will depend on the next and more complex step: to ensure that connected data can reach these tools, allowing for a robust view of positions, regulatory metrics and profitability requirements across the firm.

This article was originally published on Securities Finance Monitor.

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Top five trends in collateral management for 2018

Collateral management has broadened far past simple margin processing; collateral now impacts a majority of financial market activity from determining critical capital calculations to impacting customer experience to driving strategic investment decisions. In this article, we identify the top five trends in collateral management for 2018 and highlight important areas to watch going forward.

The holistic theme driving forward collateral management is its central role in financial markets. Collateral has grown so broad as to make even its name confusing: where collateral can refer to a specific asset, the implications of collateral today can reach through reporting, risk, liquidity, pricing, infrastructure and relationship management. The opportunities for collateral professionals have likewise expanded, and non-collateral roles must now have an understanding of collateral to deliver their core obligations to internal and external clients.

We see a common theme running through five areas to watch in collateral management in the coming year: the application of smarter data and intelligence to drive core business objectives. Many firms have digested the basics of collateral optimization and are now ready to incorporate a broader set of parameters and even a new definition of what optimization means. Likewise, technology investments in collateral are starting to tie into broader innovation projects at larger firms; this will unlock new value-added opportunities for both internal and external facing technology applications.

Here are our top five trends for collateral management in 2018:

#5 Technology Investments

The investment cycle in collateral-related technology applications continues to grow at a rapid pace. Collateral management budget discussions are moving from the back office to the top of the house. And partly as a result, the definition of the category is also changing. Collateral management should no longer be seen as strictly the actions of moving margin for specified products, but rather is part of a complex ecosystem of collateral, liquidity, balance sheet management and analytics. The usual, first order investment targets of these budgets are internally focused, including better reporting, inventory management and data aggregation. The second derivative benefit of a more robust data infrastructure focuses on externally facing trading applications, including tools for traders and client intelligence utilities that provide real-time information and pricing for the benefit of all parties. This new category does not yet have a simple name, one could think of it as a “recommendation system” but regardless of name, this has become a major driver of forward-looking bank technology efforts and efficiency drives.

As large financial services firms capture the benefits of their current round of investments, they will increasingly turn towards integrating core innovations in artificial intelligence, Robotics Process Automation and other existing technologies into their collateral-related investments. This will unlock a large new wave of opportunity for how business is conducted and what information can be captured, analyzed, then automated, for a range of client facing, business line, internal management and reporting applications.

#4 Regulatory reporting

Despite being 10 years since the bottom of the great recession, regulatory reporting requirements for banks and asset managers continue to evolve. Largely irrespective of jurisdiction, the core problem facing these firms is aggregating and linking data together for reporting automation. Due to strict timeframes and complex requirements, firms historically relied on a pre-existing mosaic of technology and human resources to satisfy regulatory reporting needs. However, these tactical solutions made scale, efficiency and responsiveness to new rules difficult. The challenge of regulatory reporting is a puzzle that, once solved, appears obvious. But the process of solving the puzzle can create substantial challenges.

Looking at one regulation alone misses the transformative opportunity of strategic data management across the organization. Whether it is SFTR, MiFID II, Recovery & Resolution Planning requirements of SR-14/17 or Qualified Financial Contracts (QFCs), the latest initiative du jour should be a kick off for a broader rethink about data utilization. Wherever a firm starts, the end result must be a robust data infrastructure that can aggregate and link information at the most granular level. At a high level, firms will need to develop the capability to link all positions and trading data with agreements that govern these positions, collateral that is posted on the agreements, any guarantees that may be applied and any other constraints that need to be considered. Additionally, it has to be able to format and produce the needed information on demand. Achieving this goal will take meaningful work but will make organizations not only more efficient but also more future proof.

#3 Transfer pricing

As firms try to optimize collateral across the enterprise, it is critical that they develop reasonably sophisticated transfer pricing mechanisms to ensure appropriate cost allocations as well as sufficient transparency to promote best incentives in the organization. Many sell-side firms have highly granular models with visibility into secured and unsecured funding, XVA, balance sheet and capital costs. And in varying fashion these firms allocate some or all of these costs internally. But many challenges remain, including: how should all these costs be directly charged to the trader or desk doing the trade; and what is the right balance of allocating actual costs versus incentivizing business behavior that maximally benefits the client franchise overall. As we know, client business profiles change through time as do funding and capital constraints. There may be a conscious decision to do some business that may not make money in support of other areas that are highly profitable. Transfer pricing is evolving from a bespoke, business aligned process to a dynamic, enterprise tool. The effort to enhance transfer pricing business models continues to be refined and expanded.

Firms that embrace the next iteration of transfer pricing will achieve a more scalable, efficient and responsive balance sheet. This will include capturing both secured and unsecured funding costs, plus firm-wide and business specific liquidity and capital costs. Accurately identifying the range of costs can properly incentivize business behaviors beyond simply the cost of an asset in the collateral market. Ultimately, transfer pricing can be a tool to drive strategic balance sheet management objectives across the firm.

Functionally, implementing transfer pricing requires access to substantial data on existing balance sheet costs, inventory management and liquidity costs that firms must consider. Much like collateral optimization, the building block of a robust transfer pricing methodology is data. Accurate information on transfer pricing can then flow back into trading and business decisions to be truly effective.

#2 Collateral control and optimization

Optimization is evolving well beyond an operations driven process of finding opportunity within a business to an enterprise wide approach at pre-trade, trade and post-trade levels. Pre-trade, “what-if” analyses that will inform a trader if a proposed transaction is cost accretive or reducing to the franchise is important, but this requires an analytics tool that can comprehend the impact to the firm’s economic ecosystem. At the point of trade, identifying demands and sources of collateral across the entire enterprise extends to knowing where inventories are across business lines, margin centers, legal entities and regions. It also means understanding the operational nuances and legal constraints governing those demands across global tri-parties, CCPs, derivative margin centers and securities finance requirements.

In a simple example, collateral posted on one day may not be the best to post a week later; if posted collateral becomes scarce in the securities financing market and can be profitably lent out, it may be unwise to provide it as margin. A holistic post-trade analysis, complete with updated repo or securities lending spreads, can tell a trader about missed opportunities, leading to a new form of Transaction Cost Analytics for collateralized trading markets.

#1 Integration of derivatives & securities finance (fixed income and equities)

The need for taking a holistic approach to collateral management has led the industry toward significant business model changes. Collateral is common currency across an enterprise and must be properly allocated to wherever it can be used most efficiently. This means that traditional silos – repo, securities lending, OTC derivatives, exchange traded derivatives, treasury and other areas – need to be integrated. Operations groups that have been doing fundamentally the same thing can no longer be isolated from one another; the cost savings that come from process automation and avoiding operational duplication is too compelling.

On the front-office side, changes needed to impact trading behavior, culture and reporting to name a few are often very difficult to implement over a short period of time. Despite similar flows and economic guidelines, different markets and operation centers, even though all under the same roof, traditionally suffer from asymmetric information. To address this challenge a handful of large sell-side players have combined some aspects of these businesses under the “collateral” banner, sometimes along with custody or other related processing business. Others have developed an enterprise solution to inventory and collateral management. We expect that, more and more, management is seeing the common threads and shared risks involved. The merger of business and operations teams translates into a need for technology that can be leveraged across silos.

The business of collateral management is reshaping every process and silo it touches. While the trends we have identified are not brand new, they all stand out for how far and fast they are advancing in 2018 and beyond. Financial services firms that take advantage of these trends concurrently and plan for a future where collateral is integrated across all areas of the business will improve their competitive positioning going forward. To add a sixth trend: firms that ignore broader thinking about collateral management technology do so at their own peril.

This article was originally published on Securities Finance Monitor.

Revisiting the Importance of Inventory Management in Collateral and Liquidity

In this article in Securities Finance Monitor, Transcend’s CEO Bimal Kadikar discusses the opportunities for more effective liquidity and collateral management – and the potential benefits to the bottom line. A solid starting point is inventory management whereby firms can match collateral to needs, improve front-to-back office communications and increase operational efficiency and compliance.

Access the full report on Securities Finance Monitor.
To download this article, please click here.