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Collateral Management Guide PART 12: Collateral Software and Systems


The correct software and systems are crucial for operating an effective collateral management function, due to the high complexity, large amounts of data, and criticality of the function to the financial and operational health of the organization.

Key Features of Modern Collateral Management Systems

The following features are considered mandatory for an effective collateral management system.  These should be fully integrated in a single package, and integrated into all existing upstream and downstream software platforms, such as Trading, Risk, Valuation, Accounting, Know Your Customer, Payment Processing, etc.

 - Collateral selection tools:  The ability to select collateral from an eligible and available pool.

 - Collateral allocation engine:  A controlled and accurate matching engine between collateral posted / taken, customer, trader, deal number, and trade type.

 - Sophisticated trade matching algorithms (especially for tri-party systems)

 - Speed (real time or near real time)

 - Connectivity to multiple dealers and venues:  The ability to connect to multiple external systems, both bi-lateral and tri-lateral, through a common interface.

 - Collateral eligibility:  Tools to analyze, calculate, and record collateral eligibility under varying conditions and inventory levels.

 - Simulations (exposures with/without different collateral, exposure over time)

 - Intraday optimization and rebalancing

 - Valuation (real time or EOD, based on various market data inputs, standard valuation models, custom models)

 - Monitoring (via blotters, reports, messages, and alerts)

 - Rehypothecation

 - Inventory management

 - Connectivity with other systems: confirmation, settlement engines, trade management systems

 - Straight through processing: price, book, confirm, margin calls, collateral inventory, settlements

 - Access to underlying data: collateral statements, trade files, reconciliations, market data, trade data, histories, audit logs

 - Management tools: dashboards, etc.

 - Reconciliations:  Reconciliation between Ours and Theirs view of the portfolio and collateral is automatically done and messaged/emailed/saved to shared messaging queues.

 - Scalable

 - Standardized:  Cmmunication protocols (e.g. SWIFT), trade/securities definition components, market and static data, ISDA terms and definitions, etc.

Collateral Management Software and Systems Providers

The following companies offer dedicated collateral management software.  Listing here is not a recommendation to purchase.

 - AcadiaSoft (  Collateral messaging and workflow

 - Algorithmics ( Algo Collateral

 - Allustra (  Kyros solution. Acquired by Omgeo ( in Sept 2008.

 - Lombard Risk (  Colline Collateral Management

 - SunGard ( Adaptiv Collateral

 - SWIFT ( Messaging using ISO 15022 securites standards on FIN, message validation, non-repudiation, guarantee of sender, STP.  Swift is a major provider of standardized messaging systems.  Has connectivity to more than 8,300 institutions globally.




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