GFF: Industry and regulators need to work together on collateral management, panellists say
05 February 2024 Luxembourg
Image: Sophie Downes
Collaboration between industry and regulators is needed to develop solutions that work within existing rules and protections, say panellists at this year’s Global Funding and Financing Summit.
The panel opened with the discussion of the increasingly important, yet complex, role of collateral management in financial markets.
One panellist, representing a Dutch pension fund, discussed the difficulties faced by pension funds in efficiently managing collateral across different markets.
Given changing regulations over the last five years, for example the exemption for pension funds from posting cash collateral at central clearing parties, she asserted “that the collateral has been of more importance than ever”.
Grant Davies, founder at Blended Markets, highlighted the potential of distributed ledger technology (DLT) to address challenges in efficiently moving collateral through the derivatives clearing process.
Davies argued that, if adopted gradually, digital technologies such as DLT and tokenisation have the potential to significantly improve collateral mobility, liquidity and efficiency.
Adrian Dale, head of regulation and market practice at ISLA, advocated for the use of initiatives such as the common domain model to realise these benefits and address current pain points and inefficiencies in the post-trade process.
However, the panel agreed that this will require collaboration between industry and regulators to develop solutions that work within existing rules and protections.
As described by another panellist, “some of the biggest hurdles are not technology based”. Leveraging technology will require collaboration from a variety of participants.
“There's multiple stakeholders in the group,” he observed. “All of those different factors are going to impact the speed of adoption.”
The panel opened with the discussion of the increasingly important, yet complex, role of collateral management in financial markets.
One panellist, representing a Dutch pension fund, discussed the difficulties faced by pension funds in efficiently managing collateral across different markets.
Given changing regulations over the last five years, for example the exemption for pension funds from posting cash collateral at central clearing parties, she asserted “that the collateral has been of more importance than ever”.
Grant Davies, founder at Blended Markets, highlighted the potential of distributed ledger technology (DLT) to address challenges in efficiently moving collateral through the derivatives clearing process.
Davies argued that, if adopted gradually, digital technologies such as DLT and tokenisation have the potential to significantly improve collateral mobility, liquidity and efficiency.
Adrian Dale, head of regulation and market practice at ISLA, advocated for the use of initiatives such as the common domain model to realise these benefits and address current pain points and inefficiencies in the post-trade process.
However, the panel agreed that this will require collaboration between industry and regulators to develop solutions that work within existing rules and protections.
As described by another panellist, “some of the biggest hurdles are not technology based”. Leveraging technology will require collaboration from a variety of participants.
“There's multiple stakeholders in the group,” he observed. “All of those different factors are going to impact the speed of adoption.”
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