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How today’s collateral technology can bring strategic value to your trading portfolio

  • Steven Castleton headshot


    Steven Castleton

    Managing Director

    Insurance | Kennett Square, PA

  • sid basu headshot


    Siddharth Basu

    Client Relationship Management

    Insurance | Denver, CO


As your organization’s financial transactions grow more sophisticated and complex, managing collateral extends beyond a regulatory exercise to one that brings strategic value — ensuring optimal asset pledges and accuracy in your trading portfolio. Technology reinvigorated the collateral space and sophisticated matching and reporting features make managing and optimizing collateral more seamless than ever before.

The use of collateral as a form of security pledged by a borrower to a lender to mitigate the lender's credit risk has been around for ages. Today, however, leading organizations are being more thoughtful and strategic when using various forms of collateral, such as cash, securities, or other valuable assets eligible as collateral. A best-of-breed collateral tool can unlock incredible success in this realm by streamlining three key elements of the process:


The collateral platform should be able to bring all data into one centralized space. This includes economic terms on trades, daily trade valuations, Credit Support Annex (“CSA”) agreements, listing of eligible collateral, securities to be pledged and their daily values. Flexible technology should also be able to embed both OTC and cleared trades. The platform should enable data consumption from multiple sources to allow complex margin calculations quickly. A centralized system helps to automate and condense efforts on these exercises which leads to fewer errors and significant time savings.


One of the key benefits of a collateral platform is that it can integrate with dealer counterparties and obtain their pricing daily. This enables you to log into the platform and visually identify any mismatches or discrepancies. For bonds posted as collateral, calculating interest expense and keeping track of payment dates can also pose challenges. For many companies, this means using spreadsheets or other manual ways of managing the process. Integrating collateral calculations and payments within the platform also significantly reduces the operational burden, alleviating complex reconciliation involving numerous parties, dense legal agreements, and web of regulatory data and controls.


A critical component of any technology is that it should elevate the process by improving efficiency and accuracy and reducing risks and errors. Minor errors in the process can cost millions due to the large notional values or volume of transactions. Often, we see clients manually create a prioritization matrix that identifies the pecking order of various forms of collateral to be allocated while also managing the numerous obligations stipulated with various counterparties through their CSA agreements. By automating tasks that adhere to a sequence of rules and established criteria can bring greater confidence into the process and allow managers to focus their attention to other greater value-add exercises. This also helps optimize and reduce administrative cost.

Collateral management technology helps insurers, asset managers and financial institutions manage collateral more effectively in a centralized view and provide enhanced automation to reduce operational risk. This end-to-end workflow promises quicker onboarding, faster turnarounds, and technical precision. In a post-trade world, it’s important now more than ever to remove manual processes and enhance the end-to-end workflow. The collateral management tool is an important function for financial institutions by creating optimization and automation across daily reconciliation. Using this technology, financial institutions can reduce costs, improve operational efficiency, and mitigate risk, making it an important area of focus for many institutions in the financial industry.

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About the authors


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit