US-based custodian and asset servicing firm BNY Mellon has consolidated its collateral management-related services into a new unit that will help buy-side traders manage the impact of new swaps regulations.
The new division, called Global Collateral Services, combines BNY Mellon’s global capabilities in segregating, allocating, financing and transforming collateral on behalf of buy- and sell-side clients. The new business will be led by Kurt Woetzel, senior executive vice president and head of global operations and technology at BNY Mellon.
More efficient management of collateral is an issue that has come under increasing focus because of sweeping changes to OTC derivatives markets that will be enacted from the start of next year. The rules will require OTC derivatives to be standardised, where possible, so they can be traded on-exchange and centrally cleared. As a result, buy-side firms will have to secure their swaps exposures with collateral, a process that is typically managed informally under bilateral deals.
"These regulatory mandates will result in an unprecedented need for and effective deployment of collateral across our entire client base, significantly increasing the demand for the collateral management services we deliver," said Woetzel.
Nadine Chakar, global head of Derivatives360, Global Collateral Services, told theTRADEnews.com that the firm has been looking at ways to leverage its collateral expertise ever since the new derivatives rules were outlined by the G-20 at its 2009 summit in Pittsburgh.
Derivatives360 is BNY Mellon's integrated unit designed to support clients' derivative strategies. The division includes execution, clearing, and collateral management, as well as middle- and back-office services.
“Our intent is to retool and repurpose collateral capabilities to better service the buy-side,” said Chakar. ”The combination of our various units will allow us to create custom-made solutions that meets buy-side firms’ needs and leverages our existing expertise.”
Chakar explained that the new unit would help give the buy-side a full view of collateral requirements across their subsidiaries and business areas, something it currently has difficulty in managing.
Global Collateral Services will also optimise money managers’ use of collateral by figuring out the most cost-effective management of margin payments, and offer transformation services that leverage BNY Mellon’s existing assets to help the buy-side find the appropriate assets to meet collateral calls. The firm already operates a proprietary global collateral management technology platform that processes a wide array of transaction types, including derivatives, tri-party repurchase agreements, portfolio swaps, and collateralised loans, as well as a wide variety of margin management activities.
BNY Mellon manages over US$26 trillion in assets and administers around US$2 trillion in collateral.