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Recognizing the importance for financial firms to achieve effective collateral optimization, SunGard has identified five key trends that can help financial institutions find significant cost savings and competitive advantages.
1. Collateral optimization, originally a focus for the sell side, is now becoming a priority for the buy side as well, and is one area in which institutions are actively looking to build or buy new technology rather than augmenting existing platforms.
2. The traditional collateral optimization approach of manually ranking assets based on preferences can no longer be relied on to deliver optimal collateral allocation results. Many firms are starting to recognize the need to address this challenge; in a recent survey conducted by InteDelta and SunGard, only 3% of respondents reported that their collateral optimization process is “advanced” or “fully automated.”
3. Firms that address the challenges of real-time data aggregation to gain a full view of collateral inventory and requirements across the enterprise will be well-positioned to achieve optimal collateral optimization.
4. Firms that choose an effective collateral optimization approach can align the true cost of collateral with the allocation process to help create substantial savings and develop a competitive advantage.
5. Increasingly, firms are taking into account the cost of collateral in their trade pricing to ensure the true economic cost of the deal is reflected in the pricing. As a result, collateral will continue to play an important role in trading activities for financial firms in the future.
“The approaches and levels of complexity involved in solving the challenges of collateral optimization vary wildly. Deciding upon the correct path to take from the outset of the optimization journey is essential. The key to success lies in implementing a solution that provides a pragmatic approach for the short term with the potential to expand in scope and complexity as business needs unfold.” -Ted Allen, head of product management, SunGard’s Apex Collateral.
Download the new SunGard report: Collateral Optimization: How It Really Works
