Baton Systems, a leading provider of post-trade processing solutions, today announced an advanced portfolio optimization capability for collateral managers, treasury teams and clearing operations. The capability is designed to identify economically efficient, operationally achievable allocations across a portfolio of cash and securities and a portfolio of obligations, rather than optimizing one margin requirement at a time.
Higher funding costs, expanding clearing obligations and volatile margin demands are sharpening the economics of every collateral decision. Yet many firms still assemble inventory, eligibility, pricing and movement constraints across fragmented systems and spreadsheets. Optimization is then run sequentially for individual venues, which can consume an asset in one decision even when it would create greater value elsewhere. The result is avoidable funding cost, scarce HQLA tied up unnecessarily, and additional movements for operations teams to manage. Firms need portfolio-wide decisions grounded in complete eligibility data and the practical constraints that determine whether an allocation can actually be delivered.
Baton’s advanced optimizer uses multiple optimization models including Mixed Integer Linear Programming, Stochastic programming and Multi-Period Optimization to assess multiple assets and obligations simultaneously. It combines a consolidated view of collateral sources and uses with normalised eligibility schedules, concentration limits, internal policies, asset economics and venue-specific delivery constraints. Teams can weight objectives such as reducing delivery cost, preserving HQLA or limiting the number of movements, then compare scenarios before choosing an allocation. The selected outcome can flow into Baton’s instruction and movement workflows, connecting analysis to action. The capability is modular, allowing firms to begin with eligibility, optimization or execution and expand over time without replacing their existing books and records.
For clients, the value is practical: more informed asset allocation, greater protection of scarce liquidity, fewer avoidable movements and a clear record of the trade-offs behind each decision. The optimizer is designed to reflect real-world constraints, so an attractive theoretical result does not become an unworkable operational plan. It builds on Baton’s established Core-Collateral infrastructure, including real-time inventory and eligibility information and automated movement workflows across connected venues, orchestrating the safe and transparent movement of tens of billions of dollars of collateral every day. The same framework can support straightforward CCP use cases initially and more complex, multi-venue optimization as firms mature.
“Collateral optimization only creates value when the answer is economically sound and operationally executable,” said Arjun Jayaram, Founder and CEO of Baton Systems. “Our advanced capability brings portfolio-wide decision-making together with the eligibility intelligence and movement workflows firms need to act. It gives clients a practical way to lower the cost of collateral, protect scarce liquidity and reduce unnecessary operational activity, while working with the systems and relationships they already rely on.”
The new capability extends Baton’s collateral proposition from real-time visibility and eligibility through to portfolio-level decision-making and execution. Its initial focus is cleared collateral for clearing members, with the architecture designed to incorporate bilateral schedules and proprietary inputs such as internal funding rates, deposit returns and nostro economics.
