BNY Mellon goes live with buy-side collateral messaging service

The new service from BNY Mellon enables investment managers to retain control over the collateralisation of their non-cleared derivatives activities.

BNY Mellon has gone live with an automated margin workflow for non-cleared derivatives, allowing buy-side clients to better handle their collateral management processes. 

The custody bank has launched its new margin messaging service, MarginConnect, enabling investment managers who wish retain control over the collateralisation of their non-cleared derivatives activity to leverage direct connectivity between BNY Mellon and AcadiaSoft. 

According to BNY Mellon, buy-side derivatives users have traditionally not been able to keep the management of their non-cleared OTC collateral in-house, as instructions to move collateral assets among custodians require SWIFT messaging, something that the majority of buy-side firms do not have. 

The lack of a SWIFT membership has meant they have had to either build and maintain their own connectivity to their custodian or outsource the messaging component instructing the actual movement of collateral to a SWIFT member.

MarginConnect’s straight-through processing (STP) can also reduce operational risk by eliminating the need to manually enter messaging details, since trade calculations are auto-generated within the platform.

BNY Mellon stated the new service will enable buy-side firms that will come under scope of the uncleared margin rules from September 2021 and 2022 to keep control of their own collateral and manage margin flows between custodians. 

“Being the first collateral manager to fully integrate our messaging with AcadiaSoft means that our clients will be able to seamlessly communicate with BNY Mellon and trade counterparties without having to rely on an intermediary,” said Dominick Falco, head of collateral segregation, BNY Mellon.

Custodians have faced calls by buy-side firms to modernise how they communicate margin calls, with a lack of automation in the collateral management space being highlighted as a major concern.

Last year, BNY Mellon and AcadiaSoft unveiled a comprehensive collateral administration service that provides a fully outsourced solution for buy-side firms seeking to comply with the non-cleared margin rules. MarginConnect complements that end-to-end offering with a cost-effective alternative, enabling those market participants with the capability to manage their own collateral processes to conduct their own margin calculation and messaging.

“AcadiaSoft is continually striving for workflow automation and cost efficiency; integrating our industry-standard messaging platform into MarginConnect provides the next step on this journey toward zero-touch processing. We are excited to play a central role in helping our mutual clients benefit from a seamless workflow in the non-cleared derivatives space and furthering our partnership with BNY Mellon,” added Mark Demo, head of community development, AcadiaSoft.