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Automating the End to End Collateral Lifecycle

By DTCC Connection Staff | 4 minute read | February 9, 2021

Speaking at the International Swaps and Derivatives Association’s (ISDA’s) Collateral Management Virtual Showcase, Duncan Scott, Product Management Consultant for DTCC’s Margin Transit Utility (MTU), positioned MTU as an automation tool or ‘plug-in’ application, and described how MTU can extend its automation advantages to more products and use cases over time. The event allowed several providers of automation solutions for collateral management to highlight the features and benefits of their offerings and discuss the importance of automating the end-to-end collateral lifecycle.

The surge in market volatility when the COVID pandemic took hold last year along with expanded regulations around margin requirements have both focused industry attention on ways to improve collateral management processes with an eye to increasing efficiency, reducing costs and lowering risk for firms.

Best Practices

DTCC’s collateral management strategy, which is a part of a broader ITP ‘settlement manager’ strategy, is to provide a best-practices solution to the industry, Scott said. “When DTCC talked to the industry as we were developing MTU, it became apparent that it wanted us to build something that connects existing, established industry assets,” he said, rather than replicating industry-standard tools that were already working well.

This mandate became the driver for the design of MTU. Accordingly, Scott explained, MTU brings AcadiaSoft, DTCC’s ALERT® and SWIFT together to create an end-to-end activity flow. Margin calls are matched in AcadiaSoft’s Margin Manager function, then MTU automatically enriches the match with standing settlement instructions (SSIs) from ALERT, the industry’s largest global database for the maintenance and communication of SSIs. And, finally, SWIFT provides the secure, machine-readable settlement instructions. MTU then provides real-time settlement confirmation and end-of-day position reports.

In addition to AcadiaSoft, MTU connects to other, complementary collateral offerings, including SmartStream, VERMEG’s Colline and TriOptima’s triResolve Margin.

Segregated Release of Collateral

ISDA panelists were asked to present a use case for their respective collateral management solutions. Scott described how MTU can automate the release process for segregated collateral. It’s a powerful use case, he said, now that uncleared margin rules (UMR) require collateral to be held in segregated accounts at custodian banks.

The authorization that is needed from the collateral pledgee, in order to release the collateral has traditionally been done via fax. MTU speeds up this process through automation, by communicating to the custodian that the release instruction is an extension of an AcadiaSoft message that represents both parties. MTU thereby eliminates the separate authentication release the custodian would otherwise need to receive.

“This use of automation plays to increased liquidity,” Scott noted. “By expediting the release of collateral from segregated accounts, that collateral can be returned more quickly – and potentially re-used the same day.”

Looking Ahead

Over the next year DTCC’s ITP will continue to focus on connecting to more collateral management venues and service providers – sparing firms from “having to build hundreds of bilateral pipes,” Scott said. “Additionally, we’ll help new clients onboard to MTU as UMR phases five and six take hold.”

Looking beyond the next year, DTCC aims to extend MTU’s reach to other marginable asset classes. “We’re a settlement process,” Scott said, “so we’re agnostic about what needs to be settled.”



Scott Duncan - Product Management Consultant, DTCC Margin Transit Utility
Duncan Scott Product Management Consultant for DTCC’s Margin Transit Utility