Research reveals real-time settlement is critical for collateral optimization.

Research reveals real-time settlement is critical for collateral optimization.

83% of financial organizations say real-time settlement is the most important factor when choosing a collateral management provider.

Research from SIX Securities Services reveals the importance of real-time settlement when it comes to choosing a new collateral management provider. Four in ten (40%) respondents report that their organization has replaced or added a new collateral management provider in the last 18 months, with a further 18% in the process of doing so. Real-time settlement was viewed as the most important factor during the selection process (83%), followed closely by central counterparties (CCPs) collateral acceptance (75%), real-time reporting (63%), flexibility to meet regulatory changes (54%), and transparency of collateral pools regardless of whether collateral pools are published (25%). Only 21% of respondents cite cost as an extremely important factor when deciding to choose a new provider.

The views between IT decision-makers and collateral management experts differ slightly. All collateral management experts cited real-time settlement as the most desired feature, while only 73% of IT decision-makers agree. The biggest gap between IT decision-makers and collateral management experts shows in the question on collateral pools: 7% versus 56%, respectively, of respondents consider it extremely important when moving to a new collateral management provider.

Those who retained their current collateral management provider say their reasons for doing so come down to IT interfacing problems (61%), closely followed by the complication element (55%), and the length of the on-boarding process (55%).

Mobility of cash and securities is key in collateral management, especially in today’s economic environment. SIX Securities Services offers its clients an efficient and coherent market for securities clearing and settlement in Switzerland and the Euro area.
With regulations such as Basel III (in particular liquidity coverage ratio, LCR) requiring banks to hold higher amounts of high-quality collateral (or cash), financial institutions are trying to cope with the reduced profitability of these positions by increasing operational efficiency and by optimizing their cash and collateral management capabilities.

Marcus Harreus, Head Clearing, SIX Securities Services