Canada is already a well-established and mature market. Do you think there is scope to further increase collateral efficiency?
Absolutely. At BNY, we believe there is an opportunity to enhance the efficiency of this market, and we are committed to doing so for our clients. Indeed, over the last few years, we have seen strong growth of Canadian assets, which is widely accepted by the international community, and we do not see that growth stopping anytime soon.
Not only is there room for closer integration with local market infrastructure, but it is also clear that awareness of the advantages a triparty construct can provide is increasing among market participants. We see a growing understanding of the scale, efficiency, and optimisation benefits it can bring, not to mention the continuously evolving access to a broad range of counterparties. It is no longer just banks and broker-dealers, with a couple of lenders thrown in. We now have hedge funds, asset managers, depository banks, pensions, sovereign wealth funds, central banks, and CCPs, just to name a few. Being on BNY’s triparty platform opens the door to our network which contains all of these counterparties.
Can you explain how triparty collateral management benefits market participants?
A triparty agent can make it easier for market participants to efficiently manage their collateral and funding obligations. At BNY, this is our core focus. We do all of the heavy lifting — security valuation and definition, eligibility monitoring, automated substitutions, and optimisation — which allows our clients to concentrate on their primary business activities.
Today, the collateral leg of most collateralised transactions can be managed in a triparty construct. Securities lending transactions, repo, derivatives, initial margin, variation margin, uncleared activity, cleared activity — being able to optimise across all of these collateral transactions is incredibly powerful. And we also support the principal leg of securities lending activity, which can be linked and settled at the same time as the collateral leg, reducing intraday liquidity usage. We have worked to increase the flexibility of our triparty platform, which has led to increased variety in the types of market participants we are seeing.
Are you focused on any specific Canadian initiatives at the moment?
Yes, we are actively working with clients to align our platform with evolving market needs. In the Canadian space, a great example of this is the work our product teams are doing to add Morningstar DBRS as a fourth rating agency. We know there are significant 'trapped assets', such as investment grade Canadian corporate bonds and North American and European securitised products, that are not rated by Moody’s, S&P, or Fitch.
Historically, gaps in coverage on these assets have limited them from being used as eligible collateral in triparty transactions. Incorporating Morningstar DBRS into our eligibility criteria enables a new subset of the collateral market to be used, enhancing liquidity.
Another great example of this is our collateral optimisation work, especially ECPOConnect. A Canadian bank was our first live client, and we have a number of Canadian banks doing proof-of-concept analysis with ECPOConnect now too. It is great to see so much activity in the region.
I often say that our job is to get the right assets, to the right place, at the right time. That is what all of collateral management boils down to and what we try to provide for clients.
How does BNY support clients in achieving their collateral optimisation goals?
Market participants face ongoing uncertainty due to regulatory, market, and geopolitical pressures, as well as changes in global market infrastructure which make it challenging to efficiently meet their collateral obligations.
BNY provides a range of optimisation solutions that offer clients efficient, flexible, and automated methods for allocating collateral to trades. Our approach is not one-size-fits-all. Rather, we allow clients to choose either a complete suite of optimisation services or specific modules that can be used alongside their own tools or vendor solutions. This allows clients to optimise their collateral portfolio and meet their unique optimisation objectives.
What trends, if any, are you seeing in Canada from the buy side perspective?
Canadian buy side clients are strongly trending toward integrated triparty and inventory management solutions. BNY is well-positioned to support these opportunities with our CollateralOne platform, which can help maximise operational efficiency and flexibility through a fully-automated collateral management operating model. Buy side clients can utilise CollateralOne to centralise their collateral, liquidity, and financing activity at BNY.
This capability is expanding to the Canadian market in the second half of 2025. There is also a large demand for flexible repo solutions among Canadian pension funds and asset managers, many of which are well supported by our infrastructure, making us the trusted partner for this transition.
It would be remiss of us to not touch on the SEC’s central clearing mandate, what are the latest developments?
The central clearing mandate is a key focus for BNY due to our unique role in the US Treasury market, where we provide our clients with an unparalleled suite of services across collateral management, clearing, and financing. In February of this year, the US Securities and Exchange Commission (SEC) announced a 12-month extension in the compliance dates. Eligible cash and repo transactions now need to be centrally cleared by the end of 2026 and the end of June 2027, respectively. The SEC also issued a temporary exemption for firms to separate house and client activity, delaying it until September of this year.
Even with the extension of the compliance dates, it is important that firms continue to prepare for central clearing, as the operational and infrastructure buildout requirements are significant. We have identified four key steps that clients should consider to prepare for the mandate: first, determine which transactions are eligible for clearing; second, determine the right access model for their activity; third, adjust their risk management practices; and finally, establish a change management programme to handle the necessary documentation, technology, and operational changes. This is a significant lift, and it is important that firms start as soon as possible.
What are the implications of the new rule for non-US market participants?
The effects of mandatory central clearing will be felt globally given the prominence of US Treasuries, requiring market participants across regions to reassess their trading and operational structures. Market participants who are conducting eligible transactions will need to submit their transactions to clearing — regardless of where those transactions take place.
We believe there will be interest in obtaining access to clearing for firms both in scope and out of scope of clearing due to the shift in market dynamics, as liquidity is likely to move toward centrally cleared markets. There are a number of solutions being developed within the industry to make it easier to obtain access to clearing. These include potential ‘done-away’ clearing solutions, as well as the development of potentially more cost-effective models, including the new Fixed Income Clearing Corporation (FICC) sponsored GC Collateral-in-Lieu offering, which could offer sponsors significant cost savings relative to current sponsored repo models.
At BNY, we are working to integrate many of these new models into our triparty platform, as we believe they will play an important role in facilitating the successful implementation of central clearing.
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