Case Study: G-SIB achieves global inventory optimization with centralized funding platform

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A global, US-based bank recognized the opportunity to improve and coordinate collateral management and funding processes across business areas to drive better firm-wide benefits. To increase efficiencies, and reduce funding costs and compliance risk, the firm pursued a centralized funding and collateral optimization strategy. To realize these strategic goals, they turned to the modular solutions and expertise from Transcend.

 

Transcend optimization case study

The Next Level in Building Data-Driven Operational Efficiency

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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. Read more

Transcend Hires Former Managing Director of CloudMargin

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Lis Hadingham to help drive the Company’s growth and expansion

NEW YORK, NY (February 10, 2020) – Transcend, a leading provider of real-time collateral and liquidity optimization technology, has hired Lis Hadingham to join Transcend’s sales team, led by BJ Marcoullier. Hadingham brings more than 20 years of experience in the securities finance industry, with extensive background in collateral management and financial technology sales. Her start coincides with an accelerating pipeline of opportunities for Transcend, whose solutions are currently implemented at major banks, including GSIBs. Read more

Collateral Management in the Age of QFC and High Quality

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An Interview with Bimal Kadikar of Transcend

RMA Global Markets and Securities Lending Director Fran Garritt recently interviewed Bimal Kadikar, founder and CEO of the collateral-focused technology firm Transcend, on current issues in collateral management, including the growing demand for high-quality collateral and the recent implementation of the Qualified Financial Contracts (QFC) reporting rules. Their Q&A follows.   Read more

A Connected Collateral Ecosystem

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Recent advances in collateral management technology – from algorithms to advanced analytics – are revolutionising the opportunities available to firms seeking optimisation at an enterprise-wide level.

Firms are increasingly realising the advantages of adopting a more centralised and harmonised approach to managing collateral, and utilising the latest software solutions to inform decision-making. Bimal Kadikar, CEO at Transcend, says: “Forward-looking firms have recognised that optimising collateral and liquidity across an enterprise, as well as within business areas, can drive efficiencies and deliver wider strategic benefits.” Read more

Collateral in 2020: Driving Optimization in an Evolving Ecosystem

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In this Global Investor Group Special Report, Collateral in 2020, Bimal Kadikar outlines the steps firms can take to optimise collateral at an enterprise-wide level and explains how a connected collateral ecosystem can be utilised to inform decision-making. Read more

Connected Data: The Opportunity for Collateral and Liquidity Optimization

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The function and definition of collateral and liquidity optimization has continued to expand from its roots in the early 2000s. Practitioners must now consider the application of connected data on security holders to operationalize the next level of efficiency in balance sheet management. A guest post from Transcend. Read more

Finadium report on ISDA’s Common Domain Model and the Digitization of Collateral

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Finadium recently spoke to Bimal Kadikar, CEO of Transcend, regarding the adoption of ISDA’s Common Domain Model (CDM) by market participants. Finadium’s new report, published by Josh Galper, Managing Principal, evaluates the role of CDM to solve business problems for collateralized trading markets and its potential to standardize data elements across the derivatives lifecycle. Bimal commented on the pace of industry adoption:

Read more

Centralized collateral management becoming a reality

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Collateral management has transitioned from an ancillary service to a core competency, largely as a result of the sheer breadth of activity from front to back office and horizontally across silos and asset classes. This has spurred a marked shift towards centralization of collateral management, providing organizations with a centralized view of inventory as well as funding and collateral optimization decisions.

But the move to a more efficient and centralized model is not without challenges. Inefficiencies and the cost of errors are magnified by the multiplicity of internal and external relationships that need to be managed and the requirement to control positions more frequently, even in real-time.

This requires a fundamental shift from managing assets only for margin purposes to managing assets for value, cost and balance sheet purposes.

Moving to a centralized collateral organization is a difficult step for many reasons and as a result, some firms are decoupling their business organization from their technology capabilities.  They are instead focusing on building a centralized, horizontal technology strategy for inventory and collateral management.

In either case, the end goal may be the same – a holistic infrastructure that can yield the benefits of centralized collateral and inventory management coupled with sophisticated analytics and firm-wide optimization capabilities. Fortunately, today’s technology enables this ultimate goal as well as the smaller moves in this direction.

Steps to collateral optimization

Regardless of the approach taken, there are a number of best practices for firms looking to increase the efficiency of their collateral and liquidity management:

  1. Achieve visibility into inventory across multiple business lines and regions. This centralized view is extremely important.
  2. Ensure all collateral schedules and legal agreements are easily accessible as these will impose constraints on decision-making.
  3. Take a centralized view of different types of obligations and requirements to enable good decision-making.
  4. Establish targeted analytics and Key Performance Indicators (KPIs) to measure and monitor progress of these initiatives.

These are vital foundational steps towards achieving an optimized collateral management environment.

Connected data: The key to better decision-making

Of course, bringing the data together is just one part of the process – the next step is to connect the data so that algorithms and analytics can be applied to it. Firms understand that the information is there for them to make better decisions, but they face a challenge in getting useable information and putting it to work.

The main obstacle, in most cases, is that they have built their operational structures and technology around specific areas of the business. To achieve a view across the whole enterprise, these businesses require coordination and connectivity across a large number of different internal and external systems – not easy to accomplish.

The solution lies in implementing a system that is easy to integrate and is targeted at connecting and harmonizing this data.

Avoiding costly re-engineering

There are sometimes negative connotations around the phrase ‘legacy technology’ but this is not always accurate. A firm’s existing securities lending or repo or margin systems may be good, but they will more often than not have been built as separate systems. Rather than re-engineering all these systems, what the firm needs is a layer that pulls these disparate systems together to ensure they are seeing a holistic and harmonized view of inventory, positions and obligations.

Most firms have taken some steps to improve their inventory management, but there is a wide difference across the industry in terms of the strategies adopted to achieve this objective. Some organizations are trying to address the issue in a tactical way, fixing one system at a time to see whether this gives them greater visibility, but this approach does not have much longevity from a strategic perspective.

The larger organizations have usually taken a more strategic approach. Some see it as primarily an internal engineering effort, while others are talking to firms such as Transcend as they seek to harness real-time data, collateral and liquidity.

Regardless of the approach taken, being able to optimize collateral and liquidity decisions at an enterprise level has huge benefits. The sheer number of firms and analysts that have explored the scale of these benefits underlines the significance of the opportunity, and we find that most firms are actively taking steps towards achieving these capabilities.

Optimization models can be implemented with a rules-based approach or even using more sophisticated algorithms (i.e. linear and non-linear programming models). These all have a vital role to play in monetizing the connected data across the firm.

Scaling the benefits

Being able to optimize collateral across business lines is an obvious benefit, but there are also advantages to be gained from reducing internal errors and fail rates. In addition, funding costs will fall because firms will be managing their funding operations more efficiently: improving securitized funding leads to a reduction in more expensive, unsecured funding.

Whether or not firms embrace centralization across all aspects of their business, it is clear that rationalizing complex systems and harnessing fragmented data sets provides for informed, confident and compliant decision-making. And once centralized funding and collateral management are fully achieved, the benefits of efficiency, cost-savings and liquidity attain even greater scale for the firm.

This article was originally published on Global Investor Group.

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Collateral management: A path littered with obstacles

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As collateral rules have grown in complexity, so has the need for greater optimization – But as Tim Steele [of Funds Europe] discovers, achieving that can be painful.

Collateral has long been used as a tool for mitigating counterparty risk and obtaining credit, but now more than ever, it is the key determinant of an institution’s ability to engage in financial transactions in the cash or derivatives markets….

“If you optimize every pool or silo individually, as a firm you will by design not be optimized,” says Bimal Kadikar.

Read the full article from Funds Europe