Fnality International’s Post

Manual processes, legacy technology and daily reports from central counterparty clearing houses (CCPs) are no longer good enough. Banks and brokers increasingly need a modernized, strategic collateral management operation, underpinned by intraday data on initial margin, variation margin, cash, and non-cash collateral -- all to enable informed, real-time decisions. Read more in today's #TechTuesday, which references a recent Nasdaq white paper on the topic.

For derivatives end users, tokenization was the biggest potential game-changer for the trading and clearing workflow according to Coalition Greenwich (a division of CRISIL). The consultancy’s report, Derivatives Market Structure 2024: Focusing on Capital and Workflow Efficiency (https://lnkd.in/euPbap6C), said tokenization is at a very early stage of development, but many large asset managers are testing the potential for using this technology to move cash and securities more efficiently. Coalition Greenwich (a division of CRISIL) Greenwich added: “From their perspective, the transformation of financial assets into tokens and the use of distributed ledgers to manage transfers could lead to a substantial reduction in time and expense.” Markets Media | Shanny Basar | https://lnkd.in/g-3u5ehW

"In July Bloomberg reported that State Street was exploring tokenized deposits and a stablecoin. However, Donna Milrod the firm’s head of product, told the Financial News that the bank is not currently planning either of these, although she doesn’t rule them out in the future. However, it is working on tokenizing a bond and tokenizing money market funds (MMFs) for use as collateral. Using MMFs as collateral means the funds don’t need to be liquidated in order to be used for margin calls. Tokenization also usually supports instant settlement rather than having to wait for redemption. Collateral mobility is one of the killer use cases for institutional DLT. Onyx by JP Morgan has its Tokenized Collateral Network with BlackRock tokenizing the shares of one of its money market funds late last year. It then pledged them as collateral for a derivatives contract with Barclays. Margin calls are not the only application. Any use cases requiring intraday transactions are a good fit for DLT. Collateral mobility enables swaps of high quality liquid assets (HQLA) amongst banks so they can ensure they hold appropriate assets on their balance sheet for compliance. For this reason, many of the big banks are backers of Europe’s HQLAᵡ. Once the collateral is tokenized it can be used for intraday repo. JP Morgan has a repo solution for its clients, and Broadridge has its DLR repo offering. HQLAᵡ is readying for its client’s collateral to be used for repo through a collaboration with Fnality, the UK-based payment infrastructure that tokenizes deposits held in an omnibus central bank account. State Street is one of Fnality’s twenty institutional backers. Until last month Ms Milrod was the leader of Digital Asset Solutions at State Street, but has now passed the baton to Vanessa Fernandes who reports to Ms Milrod." Ledger insights Capital markets •State Street working on tokenizing money market funds as collateral

A dynamic approach to debate innovation in the fixed income industry at the ICMA - International Capital Market Association #Fintech & #Digitalization forum at London’s iconic Congress Centre: 9 fast-paced roundtables with a 3 minute summary delivered by each roundtable host all expertly facilitated by Armin Peter and Spencer Maclean. Manan Wagishauser and I had the opportunity to represent Eurex to discuss #digital #repo now and in the future. There were insightful, lively, and valuable talking points from all who participated and contributed to the roundtable discussion on how the repo market can evolve in the digital age. Contributors outlined some of the key drivers behind digital solutions that have been introduced into the repo market, driven by the need to eliminate inefficiencies and reduce funding costs. The #tokenization of securities and digital issuance of new securities do alleviate some of the issues related to an inefficient post-trade settlement process. Like all new developments, a solid foundation is required – common data standards such as the #CommonDomainModel as well the recently introduced legal framework in the Digital Assets Annex by ICMA and International Securities Lending Association (ISLA) for inclusion to GMRAs and GMSLAs, all need evolving further to incorporate the nuances across the digital assets ecosystem. Additionally, incorporating DLT solutions for a broader range of assets such as #MoneyMarketFunds could further enhance the securities finance market’s efficiencies. The introduction of DLT solutions has facilitated the use of increased intraday liquidity management practices in some markets where intraday repo is now feasible, however, further attention is needed to ensure that both digital and traditional securities remain trading as a single liquidity pool. The key to unlocking further development of intraday repo is in Digital DVP – how to match digital securities movements against digital payments. This combined with enabling interoperability across multiple operating DLT platforms and systems. The repo market in Europe, in partnership with specialist FinTech companies and leading Central Banks, is successfully proving that digital securities can be combined with the movement of Central Bank Money by utilizing DLT platforms and solutions as well as existing Financial Market Infrastructure’s models and payment systems. This is a key part of the current #ECB European Central Bank trials of new technologies for wholesale Central Bank money settlement that are taking place which include trials and experiments for intraday repo transactions on both a bilateral and a centrally cleared basis. he journey continues to enable a fully effective digitalized Repo market…Hope this summary is useful, please reach out to connect, discuss and contribute to the advancement of Digital Repo – Now and In the Future! #repo #collateralmanagement #DLT #CBDCs #EurexRepo #blockchain

UBS | JD Risk Solutions - Optimizing Intraday Liquidity Management Could Distributed Ledger Technology help make same day settlement the new normal? Source: https://lnkd.in/gBT3QH9M #ubs #optimizing #intraday #liquidity #management #dlt #blockchain #asset #tokenization #settlement #newnormal #fnality Credits: Anthony Clark-Jones Emma Stew Dipak Chotai Highlights: To navigate and unravel these multifaceted dynamics and start preparing for the potential of global T+0 (same day) settlement, our view is that Investment Banks and aligned Functions now need to progress their application of Distributed Ledger Technology (DLT), primarily in ways to optimize and mitigate usage of intraday liquidity buffers, and particularly through embracing Payment versus Payment (PvP) settlement. DLT provides a transparent and decentralized ledger for post-trade settlement, reducing counterparty risks and enhancing control. Smart contracts — logic-driven software on DLT networks — can be programmed to automate and enforce counterparty obligations, and ensure accurate and timely settlement. This increased visibility and automation contributes to more controllable and intelligently orchestrated settlement: DLT-based systems can, at scale, minimize errors, disputes, the need for manual interventions, and perhaps most importantly, aggregate, net, sequence, and instruct final multilateral settlement to ensure optimal use of increasingly expensive liquidity. One system that could be applied to drive efficiency across the wholesale post-trade landscape, and through PvP settlement, is Fnality Payment System (FnPS). The system’s efficiency and immediate settlement finality allow financial institutions to optimize their intraday liquidity usage, minimizing the need for large buffers and improving overall liquidity management. This can lead to more effective utilization of capital within banks and more transparent and predictable capital flows across the markets. Not only can this lead to vast cost savings, a wholesale digital — and regulated — payment leg unlocks the potential for truly digital business models at institutions. In addition, and with the move to T+1 for North American securities’ settlement, the ability to responsibly and sustainably compress transaction lifecycles is ever more required. Optimizing to T+1 is challenging, and moreover, any future, widespread move to T+0 settlement will inevitably require leveraging technologies like DLT — it would almost certainly be an ask too far for existing wholesale payment infrastructure and schedules. In returning to the fundamentals, this paper explains the pressing need for action and a potential pathway ahead. The aim is to explain and draw together otherwise fragmented strands of what is a multidisciplinary and industry-level challenge, and do so in a way that offers sufficient clarity for structured debate, agreement, and progress

"On behalf of "members of the regulated U.S. financial sector," SIFMA launched an initiative - the "Regulated Settlement Network ("RSN") proof-of-concept ("PoC")" - to explore the feasibility of a shared ledger to settle tokenized commercial bank money, wholesale central bank money, U.S. Treasury securities and other tokenized assets." #crypto #cryptoassets #digitalassets #tokens #tokenization #digitalledger #dlt https://lnkd.in/e7zrYiER

The SEC’s Reform of the Repo Market: Enhancing Financial Stability Through Automation and Electronification The SEC’s repo market reform signifies a crucial step towards fortifying financial stability and resilience, writes Ed Tyndale-Biscoe, Head of Product Management for ION Markets’ Anvil product. By addressing the systemic risks inherent in the repo market and embracing technological innovations, regulators aim to foster a more robust and competitive market environment, Mr. Tyndale-Biscoe says, explaining that as market participants adapt to central clearing, technology will be vital to ensure compliance in a reinvigorated repo market. #ccp #centralclearing #repo #financialregulation #repomarket #fixedincome https://lnkd.in/ds4Efr9y

Collateral Dynamics in GMX V2: Balancing Risk and Liquidity in Perpetual DEX As we delve deeper into the mechanics of decentralized perpetual exchanges, let's explore the strategic collateral choices in GMX V2 markets and their implications for traders and liquidity providers alike. In GMX V2, each market is structured with three key components: Index Token: The asset being traded (e.g., SOL) Long Collateral Token: Typically a blue-chip asset (e.g., ETH) Short Collateral Token: Usually a stablecoin (e.g., USDC) This design isn't arbitrary—it's a carefully crafted risk management strategy. Why Blue-Chip Assets for Long Collateral? Blue-chip assets like BTC or ETH often have higher valuations and tend to move in correlation with many index tokens. This ensures sufficient collateral to cover potential payouts, even during significant market movements. For instance, with ETH ($3,500) as long collateral for a SOL ($170) market, there's a substantial buffer to manage price fluctuations and trader profits. Stablecoins as Short Collateral: A Stability Anchor Stablecoins provide a reliable, low-volatility foundation for short positions. Their price stability offers predictable liquidity for settling trades and managing risk exposure. Risk Mitigation and Market Efficiency This collateral structure helps prevent scenarios where market liquidity could be exhausted. However, it's crucial to note that extreme market conditions could still pose challenges. Consider a hypothetical scenario where SOL's price approaches or exceeds ETH's. Such an event could strain the market's ability to cover long positions, potentially leading to liquidity crunches or even temporary market closures. Implications for Liquidity Providers and Traders Can you guess how GMX manages this problem?

How is R3 championing #DLT in #regulated #financial markets? R3's Kate Karimson (née Henry) spoke to Disruption Banking on how #DLT has the potential to fundamentally reshape the future of money and finance in a powerful and positive way. Throughout the piece discover the current and future state of #CBDCs, #interoperability and the critical role of open, collaboration and further education to progress markets. Read here: https://lnkd.in/ez82JKnh

***exciting repo news alert*** We are excited to announce the launch of our revolutionary, new #repo data solution with several Tier 1 banks from Japan, Canada and Australia which, for the first time, provides an unrivalled, transparent and deep view of the global repo markets.   Operating via a ‘give-to-get’ model, our solution ingests clients’ #Securities Financing Transactions Regulation (#SFTR) data, which is then anonymised, aggregated, enriched and analysed to produce advanced analytics and insights for the front office, risk management and finance functions of banks and other financial institutions. Our CEO Danny Corrigan commented: “We are delighted to launch this innovative new solution with several Tier 1 banks on board, and further financial institutions joining in the near future from the UK, Germany and Spain. We now have the critical mass of data to provide a new level of transparency to the repo markets. The improved price, rate and volume data should enhance liquidity, provide greater confidence and a clearer understanding of prevailing risks.” If you’d like a demo of how our new repo data analytics solution works, please get in touch: contact@londonreportinghouse.com #repo #sftr #repoanalytics #datasolutions #regtech #securitiesfinance #regulation https://lnkd.in/d8SxmxhC