A new collateralised world
13 October 2020
Chris Walsh, CEO of AcadiaSoft, sits down with SLT to discuss the impact of COVID-19 on collateral management by accelerating automation, and explain the new concept of deep straight-through processing
Image: Sergey Nivens/Shutterstock.com
How has COVID-19 affected the industry?
In the short-term, the primary impacts we鈥檝e seen at AcadiaSoft are increased market volatility, volume spikes and forced virtualisation. Firms have had to develop crisis response plans and operate at a faster pace to meet client needs, which are rapidly evolving in this environment. Many of the changes made to improve operational efficiency that were catapulted forward during the pandemic may very well become permanent.
How has AcadiaSoft managed during this difficult time?听
AcadiaSoft was created and structured to protect market participants, especially during times of crisis or challenge. We have been able to maintain and, in some instances, exceed productivity levels beyond where they were prior to the pandemic. We were able to seamlessly scale up to meet demand as margin call automation rates increased by nearly 80 percent during March. Most notably, despite the increased volume, there was no increase in call dispute rates.
Is it important for organisations to transform their front-to-back collateral management infrastructure and processes that were exposed during the COVID-19 pandemic?
COVID-19 exposed manual methods that are difficult to perform remotely, and accordingly accelerated the adoption of increased automation and standardisation within the margin call process. While this occurred out of necessity, we believe the industry will continue making progress and reap the benefits of this increased efficiency. For example, we have over 200 organisations automating their interest statements and we expect to see full automation across the AcadiaSoft community very soon. This will eliminate email exchanges and lengthy disputes from the production of final interest statements between parties and further streamline the margin management process.
Whilst automation and standardisation are a large part of the transformation, there is also an increased need to focus on exceptions-only processes. Identifying and fixing disputes early in the workflow assists teams to become nimbler enabling them to eliminate costly errors or settlement fails.
Why must collateral management adapt in order to meet the challenges of a post-COVID-19 world?
Collateral management was evolving rapidly prior to the pandemic. Collateral management was already becoming more standardised and automated, and the pandemic has fast-tracked this. Now, firms will need to make significant changes in order to remain competitive. Business processes and procedures will be re-evaluated. Project initiatives will become more streamlined. Ultimately, this standardisation and automation will allow firms to operate faster, more efficiently and with less risk, regardless if the future is back in the office or in a remote environment.
What are the transformation opportunities for collateral management?
The industry has a prime opportunity to transform the collateral management workflow. AcadiaSoft is doing its part by automating processes, simplifying Uncleared Margin Rules (UMR) implementation and providing new tools for clients. Specifically, our Relay service, which enables streaming email, spreadsheet and PDF exchange of margin calls into a firm鈥檚 existing margin workflow, now represents more than 560 firms and has expanded our community to more than 1,400 organisations 鈥� growing at 500 channels every quarter. Additionally, our repo volume has seen record growth of 80 percent over the past year as firms look to automate entire over-the-counter inventories.
How are technology and data influencing the future of collateral management?
I believe data is going to propel the industry into the next phase of collateral management. Earlier this year, AcadiaSoft launched its Data Exploration Suite, which allows clients access to data pulled from every aspect of its services and partner services. Firms can now review data and analytics, from industry and peer group comparisons, to periodic and real time dispute monitoring and volume trend analysis. The more data is available, the more firms can optimise operations and risk management. More data will also lead to increased and smarter automation, helping collateral management move smoothly, and eventually, result in a 鈥榥o-touch鈥� process.
What can we expect for the future in collateral management?
We see collateral management on the path towards risk prevention, meaning that the majority of current issues will be resolved before they happen. Electronic margining has been gradually transforming the industry and we鈥檙e nearing the point where all calls are electronic, at which point we鈥檒l be ready for a whole new level of automation.
The next level we want to achieve is 鈥榙eep straight-through processing (D-STP)鈥�. Similar to an in-depth learning system that digs deep into data to draw conclusions 鈥� the workflow systems will dig deep to determine whether a call exception needs to be reviewed and who needs to analyse it. We believe that widespread electronic messaging, coupled with D-STP, has the potential to revolutionise collateral management for the better.
In the short-term, the primary impacts we鈥檝e seen at AcadiaSoft are increased market volatility, volume spikes and forced virtualisation. Firms have had to develop crisis response plans and operate at a faster pace to meet client needs, which are rapidly evolving in this environment. Many of the changes made to improve operational efficiency that were catapulted forward during the pandemic may very well become permanent.
How has AcadiaSoft managed during this difficult time?听
AcadiaSoft was created and structured to protect market participants, especially during times of crisis or challenge. We have been able to maintain and, in some instances, exceed productivity levels beyond where they were prior to the pandemic. We were able to seamlessly scale up to meet demand as margin call automation rates increased by nearly 80 percent during March. Most notably, despite the increased volume, there was no increase in call dispute rates.
Is it important for organisations to transform their front-to-back collateral management infrastructure and processes that were exposed during the COVID-19 pandemic?
COVID-19 exposed manual methods that are difficult to perform remotely, and accordingly accelerated the adoption of increased automation and standardisation within the margin call process. While this occurred out of necessity, we believe the industry will continue making progress and reap the benefits of this increased efficiency. For example, we have over 200 organisations automating their interest statements and we expect to see full automation across the AcadiaSoft community very soon. This will eliminate email exchanges and lengthy disputes from the production of final interest statements between parties and further streamline the margin management process.
Whilst automation and standardisation are a large part of the transformation, there is also an increased need to focus on exceptions-only processes. Identifying and fixing disputes early in the workflow assists teams to become nimbler enabling them to eliminate costly errors or settlement fails.
Why must collateral management adapt in order to meet the challenges of a post-COVID-19 world?
Collateral management was evolving rapidly prior to the pandemic. Collateral management was already becoming more standardised and automated, and the pandemic has fast-tracked this. Now, firms will need to make significant changes in order to remain competitive. Business processes and procedures will be re-evaluated. Project initiatives will become more streamlined. Ultimately, this standardisation and automation will allow firms to operate faster, more efficiently and with less risk, regardless if the future is back in the office or in a remote environment.
What are the transformation opportunities for collateral management?
The industry has a prime opportunity to transform the collateral management workflow. AcadiaSoft is doing its part by automating processes, simplifying Uncleared Margin Rules (UMR) implementation and providing new tools for clients. Specifically, our Relay service, which enables streaming email, spreadsheet and PDF exchange of margin calls into a firm鈥檚 existing margin workflow, now represents more than 560 firms and has expanded our community to more than 1,400 organisations 鈥� growing at 500 channels every quarter. Additionally, our repo volume has seen record growth of 80 percent over the past year as firms look to automate entire over-the-counter inventories.
How are technology and data influencing the future of collateral management?
I believe data is going to propel the industry into the next phase of collateral management. Earlier this year, AcadiaSoft launched its Data Exploration Suite, which allows clients access to data pulled from every aspect of its services and partner services. Firms can now review data and analytics, from industry and peer group comparisons, to periodic and real time dispute monitoring and volume trend analysis. The more data is available, the more firms can optimise operations and risk management. More data will also lead to increased and smarter automation, helping collateral management move smoothly, and eventually, result in a 鈥榥o-touch鈥� process.
What can we expect for the future in collateral management?
We see collateral management on the path towards risk prevention, meaning that the majority of current issues will be resolved before they happen. Electronic margining has been gradually transforming the industry and we鈥檙e nearing the point where all calls are electronic, at which point we鈥檒l be ready for a whole new level of automation.
The next level we want to achieve is 鈥榙eep straight-through processing (D-STP)鈥�. Similar to an in-depth learning system that digs deep into data to draw conclusions 鈥� the workflow systems will dig deep to determine whether a call exception needs to be reviewed and who needs to analyse it. We believe that widespread electronic messaging, coupled with D-STP, has the potential to revolutionise collateral management for the better.
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