4sight Financial Software, a leading provider of software and consultancy to the Securities Finance and Collateral Management markets, has launched a collateral optimization module for its Xpose Collateral Management system.
The solution allows financial firms to run automated availability checks based on a counterparty’s acceptability and concentration schedules. The system will then propose the cheapest to deliver collateral within schedule.
The collateral optimization system can also run collateral allocations across all of a firm’s counterparts and across business lines, including securities lending, repo, and OTC/listed derivatives. This allows the system to show the discrepancy between the firm’s actual collateral cost and optimum collateral cost. The system bases actual collateral cost on current allocations and optimum collateral cost on the best possible allocations.
Furthermore, the module also allows users to run ‘what if’ scenarios to allocate collateral against underlying clients in the collateral pool without booking any collateral movements. This allows users to collateralize their underlying clients in the optimum manner, within their customers’ acceptability and concentration guidelines. It also identifies any surplus collateral for reinvestment and frees up valuable liquidity.
“Collateral optimization is becoming of critical importance in making effective use of balance sheet due to forthcoming regulations such as Basel III and Dodd Frank, and the new module helps users to manage collateral supply and demand in a much more efficient manner”, comments Judith McKelvey, 4sight Sales Director. “We have seen a great deal of interest in collateral optimization from both clients and prospects, as the system will help them to retain vital liquidity, boost revenues, and reduce their cost of collateral across business lines and asset classes.”