How CCPs are Navigating the New Global Collateral Management Paradigm

The clearing landscape is evolving quickly. Read a summary of Nasdaq's new white paper diving into the trends and then download the full paper to understand the impacts to central counterparty clearing houses (CCPs) and their member firms.

Central counterparty clearinghouses (CCPs) face a changing landscape shaped by dynamic and rapid forces. The global collateral management paradigm is shifting as new regulations come into play and CCP member firms seek more services for optimization as the collateral function evolves.

At the center of this transformation is also the enduring theme of technology modernization and its role in helping CCPs navigate rapid change with operational agility and competitive opportunism. To help CCPs and the larger market ecosystem better understand the forces at play, Nasdaq has released a white paper on the changes in collateral management that digs deeper into these themes and their implications.

Download Whitepaper

Why CCPs Need to Prepare for the New Global Collateral Management Paradigm

Collateral management is a strategic imperative

What’s really at work behind the scenes is the growing strategic importance of collateral management. New regulations are bringing more asset classes under central clearing mandates while margin requirements for uncleared derivatives are increasing as more firms come into scope, creating costs and challenges for market participants that are looking to CCPs for aid in onboarding and managing through change.

This change comes amid high interest rates and other pressing macro factors. CCPs are at the heart of collateral flows and thus must manage the exploding level of exchanged collateral to ensure the safe movement of liquidity while further empowering their clients. Pressures from all sides are now shaping the future of CCP ecosystems, emphasizing the importance of operation agility and expanded services in the face of rising costs and demands.

Siloed technology stacks only increase the challenges

In such a disruptive environment, fragmented technology stacks become a liability. Siloed and aging systems, along with manual-based workflows, must be solved for if CCPs are to capitalize on increased collateral flows or attain the operational agility needed in today’s fast-moving environment. Client services will be especially important in the competitive landscape, as members and their clients demand functionality to replicate margin more accurately, optimize collateral and reduce risks of overcollateralization. While global CCPs already offer margining tools to offset risk, there is still room to simplify operations and generate more efficiencies by condensing and collapsing the myriad platforms they use.

In the white paper, we dive into factors like:

The increasing scope of regulatory regimes
Modernization and the CCP ecosystem
Growing priority for collateral optimization programs
Data services and the requisite tech stack infrastructure
Tokenization and new asset class opportunities

Technology modernization becomes a focal point

Underpinning this wide-scale transformation are advancements in technology. Cloud-enabled platforms offer CCPs the flexibility, capacity and scale they need to manage flows and capitalize on opportunities, whether markets or asset classes. Modernization can buttress operational resilience while unlocking innovation. Cloud will also be foundational to deploying emerging technologies like AI. On the other hand, legacy technology may restrict CCP agility and innovation while draining costs and resources.

In sum, the future of capital markets collateral management is digital, transparent and agile. CCPs stand to gain by evolving with the times but otherwise add operational and reputational risk by standing still.

Read more by downloading the white paper and learning about Nasdaq Real-Time Clearing and Nasdaq Calypso for collateral management.