03.27.2014

BNY Mellon Enhances Collateral Management

03.27.2014
Terry Flanagan

BNY Mellon has automated the calculation of collateral requirements in the exchange-traded funds (ETF) marketplace. The BNY Mellon enhancement is designed to reduce errors in ETF transactions and improve the ability of Authorized Participants (APs) to manage and allocate funds.

The primary market in ETFs is driven by APs which are large financial institutions/broker dealers that trade the underlying securities during the creation or redemption of ETF units.

BNY Mellon has developed an automated process for calculating collateral requirements and reporting them to the APs on a daily basis. Prior to this enhancement, the APs were notified through a manual process that was not as efficient as the new automated system. This additional functionality builds on BNY Mellon’s ETF Center, which was launched as the industry’s first global technology platform designed to serve the needs of APs on both the web and mobile applications.

“More efficient and automated transactions will further enhance the reliability and attractiveness of the ETF marketplace,” said Joseph Keenan, head of global ETF services for BNY Mellon, in a press release. “Authorized participants that work with BNY Mellon will have better reporting and better management of the cash collateral they employ in the marketplace.”

With many funds, APs have the option of delivering a basket of securities or cash collateral to an ETF servicer, such as BNY Mellon, when creating new ETF fund shares. By posting cash collateral on the settlement date of an ETF order, APs can ensure that the ETFs shares are released in a timely manner even if some components of the ETF basket cannot be delivered by settlement date. The collateral remains in the ETF servicer’s account until delivery of the components of the basket covered by the collateral.

Separately, derivatives collateral management provider CloudMargin has connected with TriOptima’s triResolve reconciliation service to facilitate OTC portfolio reconciliations.

CloudMargin collates, normalises, enhances and enriches data from a variety of sources and a huge variety of formats to submit data to triResolve.

“Clients are increasingly looking for state of the art collateral management systems that can simultaneously help them to comply with their obligations under Dodd-Frank or EMIR, whether that’s reconciling their portfolios, transmitting trade data to repositories, or connecting to clearing brokers,” said Stuart McHardy, managing director of product development and COO of CloudMargin, in a press release. “I’m delighted that by offering our clients STP connectivity with triResolve, we are helping them to satisfy their regulatory requirements with minimal effort or investment on their part.”

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