Mohideen Abdul Khader, director of collateral optimisation at BNY Mellon, discusses the increasing client demand for optimised portfolios and what building blocks the firm is creating to attain this on a global scale
Image: Mohideen Abdul Khader
As funding desks become more centralised, Uncleared Margin Rules (UMR) expand and binding constraints for capital and liquidity take hold. The need for an optimised portfolio has grown significantly and has become critical to our client’s success.
BNY Mellon’s Continuous Portfolio Optimization (CPO) and Enterprise Continuous Portfolio Optimization (ECPO) solutions provide an efficient, flexible and automated method of allocating collateral to trades to help meet those demands. We use a patented algorithm based on multiple objectives, constraints and a blended cost model defined by clients to meet their various liquidity, regulatory, funding and capital requirements.
Globally, our solution optimises US$1.8 trillion of collateral daily. It can optimise and allocate complex portfolios in a short period of time — typically less than 15 minutes with our average process taking five minutes.
Our optimisation solutions do not have a one-size-fits-all approach. Clients can choose to use the full suite of optimisation services or specific modules in conjunction with their own optimisation tools, or vendor solutions.
We are working with our clients to help them optimise, mobilise and connect all of their collateral needs across different products and venues. We are investing in creating key building blocks to achieve a truly global optimisation for our clients.
1. A scalable, faster and flexible optimiser that can optimise aggregated sources and uses of a client’s collateral across products and venues. Flexibility in defining a blended cost model to achieve multiple optimisation objectives — such as reducing collateral cost associated with Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and Comprehensive Capital Analysis and Review (CCAR).
2. Comprehensive and enriched data to have a near real-time view of a clients’ sources and uses of collateral across asset types, transaction types and custodians with associated collateral eligibility and prioritisation rules (either feeding information directly, or through our integration with fintechs).
3. Mobilisation of securities across regions and legal entities. Our one platform strategy and interoperability tools facilitate the efficient movement of collateral across BNY Mellon’s US$5.5 trillion network.
4. We are increasing our connectivity to new markets, triparty agents, central counterparties, central banks, fintechs and clients’ internal systems. For example, we have launched services with Hong Kong Stock and Bond Connect, Euroclear Collateral Interface, Korea and Indonesian markets.
We are excited to be able to help our clients by using a consultative approach and in depth analysis as they look to optimise their global portfolio of assets across regions, legal entities and service providers.
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Image: Mohideen Abdul Khader 