When we reflect on the impact the past 18 months have had on all our lives, it is incredible that as an industry, we have shown a resilience to continue to deliver and innovate at such a significant pace. Arguably, we now stand at the dawn of the most transformative period in the quest of maximising efficiency where the financing and collateral ecosystems are concerned.
From the delivery point of view, phase 5 of UMR brought into scope an array of clients who, all at the same point, had a need for more holistic collateral and financing requirements. This presented the collateral industry both significant opportunities and challenges during the past year, not least the unprecedented documentation and on-boarding efforts.
As we look toward phase 6, market participants will begin to define best practice from their experience of phase 5, but will need to think about additional solutions as clients’ needs are likely to shift to increased support for threshold monitoring and comprehensive pre-trade analytics tools.
The year also saw great momentum in the delivery of products and solutions relevant to certain regions and client sectors as firms took a more granular view of collateral, embodied most obviously in APAC where regional nuances of clients’ jurisdictions or asset classes have led to development of new and exciting collateral solutions for both onshore and international investors.
With regards to innovation, in 2020, a feature in this Global Investor publication predicted that the 10-year view on the collateral ecosystem would be heavily influenced by digital or tokenised collateral. We see this as a reality already with tangible momentum in solving for transactional inefficiencies. We fully expect the pace to quicken as participants realise the benefits extend beyond purely addressing inefficiencies, to true asset mobilisation.
And as collateral mobilisation and efficiency requirements drive behavioral changes, it is obvious we will see a growing need for data, analytics and automation supporting both pre- and post-trade flows and governance generally. This increasingly brings into focus the subjects of standardisation and technology developments such as APIs and cloud workflow adoption.
All of this and more are deservedly explored in the 2022 edition of the Global Investor Collateral Guide which J.P.Morgan is once again proud to sponsor, as we serve clients across the industry.