Broadridge has recently strengthened its collateral team—why did it make these appointments?
We are committed to building our global collateral management capabilities, so we’re investing in individuals who have deep industry expertise to add to our existing securities financing team.
We are bringing in knowledgeable resources with various backgrounds to support our collateral management offering, but the key areas that we needed to recruit for were relationship management, sales and product management. Michael Airey has joined us as vice president of strategic solutions in the capital markets team. He is responsible for sales channel enablement for our global securities financing and collateral management solutions, and will act as the subject matter expert for our FinancePro and CollateralPro products.
Airey was managing director for short-term markets and financing, and head of US enterprise collateral optimisation at Royal Bank of Scotland, and he has held similar roles at Dresdner Bank and Merrill Lynch. He has been working in the securities finance and collateral industry for more than 20 years, so he is very knowledgeable about the trends and demands that buy and sell side firms face in terms of collateral management and financing.
The other addition to our team was Mark Faber, who joined as product manager of our collateral management business. He has spent more than 17 years managing various operational functions for investment banks. He has been responsible for managing multi-product collateral management groups at financial institutions including Societe Generale, Goldman Sachs and Jefferies.
His experience in collateral management has focused on collateral management operations, system replacement, department transformation and support of regulatory initiatives. His past experience will be valuable in helping us understand our clients’ needs, which will ultimately shape our collateral management strategy.
What are you aiming to achieve with these new hires?
Although CollateralPro is an upstream/downstream system agnostic solution, our aim is to enhance our offering to Broadridge clients by linking it to our other, globally deployed, front-, middle- and back-office solutions. We decided as a company to focus on collateral management, because we know it is a top priority for our clients around the globe as well as other market participants. Our strength in global securities processing makes us a logical choice to provide an enterprise collateral management solution, too.
With links to depositories, would it be right in saying your middle-to-back office solution is becoming more of an enterprise one?
Indeed, we have links to depositories, utilities, custodians and other key players around the world through our widely-used securities processing platforms (Gloss, BPS, Impact, etc). Our plan is to connect CollateralPro into those systems so we can provide an enterprise collateral management infrastructure.
In addition to local deployment, we offer CollateralPro in a hosted environment so that anyone with connections to Broadridge data centres can obtain an integrated end-to-end solution with minimal IT costs. Use of our technology allows participants to adopt an enterprise strategy for collateral management without the expense normally associated with this kind of initiative.
What is your position on the so-called collateral shortfall?
We are not seeing that come about—yet. Markets are changing, but right now, there has been enough collateral to meet the market demands. The flexibility to accept different types of collateral is key, and participants’ willingness to adopt that approach has alleviated concern about a shortfall to some extent.
Having said that, we expect there will be a spike in collateral movements because of margin requirements and rules surrounding settling in different currencies. The sheer volume of margin calls should only increase and assumptions are that sufficient collateral will be available to support those movements, so we think that the shortfall doomsaying was perhaps a little over done.
Of course, the situation could change tomorrow, but right now, without a crisis, markets are surviving.
The central counterparty is an ever-present regulatory reliever—how much securities finance business do you predict going through them?
We see that as happening slowly but surely. Our internal analyses have suggested that if the regulatory schedule stays as is and as more agreements between central counterparties (CCPs) and new members are made, the vast majority of transactions are going to be centrally cleared over the next four years. It will take some time for that to happen because the old bilateral agreements need to run their course. Once they are done, we will see more than half of the business change over to CCPs.
What else is next for Broadridge?
One area that we are looking at is concerns about spikes in collateral management operational workloads. We have a large business process outsourcing (BPO) team that focuses on financial services operations and we are putting into place teams that can provide various levels of collateral management outsourcing, depending on a company’s needs or desires. The plan with that is to coordinate the collateral management operations teams and link into either our or their technology stack. We have identified a number of aspects of collateral management functionality that are real candidates for outsourcing.
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