US investment bank Citi is to overhaul its treasury function for cleared derivatives through a new partnership with post-trade and blockchain technology provider Baton Systems.
Citi will automate rules for the movements of cash and securities collateral to and from clearing houses in a bid to reduce risk by removing manual entries in systems.
The bank will also use Baton’s platform to aggregate data from its banks and custodians and track collateral from its clients through to central clearing counterparties. The system will also offer real-time views of various metrics, such as risk thresholds and excess/deficit calculations.
“Our integration with Baton will help drive greater efficiency across our entire collateral workflow process and significantly reduce the risks we typically see with manual intervention,” said head of financial resources management at Citi futures, clearing, and FX prime brokerage, Mariam Rafi.
“The automation and real-time view of collateral the system provides will enable us to more effectively deploy capital in the right place at the right time.”
Arjun Jayaram, CEO, and founder of Baton Systems, added that the recent market volatility has increased the industry’s focus on managing collateral.
“Managing and redeploying cash and collateral has always been critical for safe and economic performance of clearing members,” said Jayaram. “As evidenced by the recent bout of volatility, it is even more critical for financial institutions to be equipped with tools that will help them effectively manage their intraday liquidity needs and reduce risk.”
The partnership with Baton follows Citi’s recent investment in London-based capital markets software provider Genesis Global Technology. Citi has invested in Genesis via its Markets FinTech Investments and SPRINT groups. Terms of the deal were undisclosed.