Effective collateral intelligence and mobility are critical levers in the risk management toolkits of global financial, corporate, and sovereign institutions. Decisions about where collateral is held and deployed directly impact funding costs, real-time liquidity positions, and a broad array of regulatory constraints. Managing those trade-offs requires an enterprise-wide view of obligations and available assets — supported by optimisation models that can mobilise securities and cash across venues.
Since the financial crisis, regulatory and balance sheet constraints have increased the cost of inefficient collateral allocation and made timing, access, and flexibility of movement more important. To respond effectively to risk and settlement demands, institutions require real-time information, clear objectives, and the ability to mobilise rapidly.
Three trends are reshaping how institutions meet those demands. First, markets are moving towards continuous, always-on operation. Second, digital technology — tokenisation, programmable ledgers, and atomic settlement — is expanding definitions of collateral and the pace of market activity. Third, the latent value of data and intelligence is just beginning to be realised, turning visibility and orchestration into a source of efficiency. From BNY’s perspective, this shift is elevating collateral as a strategic resource that must be visible, mobile, and deployable across the enterprise.
Managing a fast-changing set of constraints
The simultaneous constraints shaping collateral decisions have grown and evolved over time as regulators have sought to promote greater financial stability and mitigate multifaceted financial risk. For example, the Liquidity Coverage Ratio (LCR) mandated ample liquidity reserves and sufficient term funding. The Net Stable Funding Ratio (NSFR) required matching long-term assets with appropriately stable liabilities.
The global systemically important bank (G-SIB) scoring framework added several new dimensions including cross-jurisdictional activity, reliance on short-term wholesale funding, and interconnectedness to financial counterparties. The Supplementary Leverage Ratio (SLR) measures overall balance sheet leverage; even low-risk activity can consume scarce balance sheet capacity.
Looking ahead, the eventual implementation of Basel III Endgame will introduce additional capital requirements and further increase the range of constraints institutions must manage.
Collateral management decisions in this context often require trade-offs between several evolving and interrelated constraints with material financial impact. These constraints may result in a more resilient, safer financial system that carries higher operating costs for participants.
Those costs can circulate throughout the broader financial ecosystem through higher financing rates and transaction fees as institutions implement liquidity buffers or limit balance sheet deployment.
The impact is not confined to regulated banks and dealers — buy side counterparties face reduced intermediation capacity and less favourable pricing. Intermediaries that are more efficient and effective in managing liquidity, capital, and other constraints can in turn offer better pricing or greater capacity.
The same dynamic can benefit the wider market: structural enhancements that mitigate frictions and reduce cost across the collateral and financing ecosystem can have network effects, improving price efficiency and increasing capacity for many market participants.
How collateral platforms have helped optimise these constraints
Collateral platforms connect diverse networks of institutions with equally diverse financial objectives. They facilitate safe and efficient collateral exchange to generate funding and manage risk, providing technology to view, allocate, mobilise, and optimise collateral across obligations and accounts.
These networks offer access to deep pools of liquidity and services for implementing key contractual terms such as eligibility, haircuts, and concentration limits. Netted, orchestrated settlement, and credit extension further reduce counterparty risk and intraday liquidity requirements.
Together, these services can help institutions manage several key constraints more efficiently. Under LCR, 30-day term funding, sufficiently broad collateral schedules, and substitution rights help institutions secure funding for a rotating book of securities.
For NSFR, collateral platforms can help firms align term assets with more stable liabilities and improve decision-making around tenor transformation. In the context of G-SIB, firms may benefit from broader counterparty access and structures that help manage balance sheet footprint more efficiently.
Modern collateral platforms have already evolved beyond operational utilities to act as key financial optimisation hubs, particularly when integrated with other critical client financial services such as clearing and custody platforms. Their role is likely to continue expanding as 24/7 operating models and digital asset technology unlock greater efficiencies and new capabilities.
Building infrastructure for a more continuous market environment
The move towards always-on markets is one of the most significant developments in collateral markets today, and for the foreseeable future. Markets have historically closed according to predictable daytime, weekday, and holiday schedules, even though market-moving risks can emerge and accumulate at any time including weekends.
Technological developments that enable automated operations and synchronisation of activity around the clock are now making more continuous markets feasible. Collateral platforms that support continuous settlement can create additional value by decreasing overfunding, precautionary liquidity buffers, and net financing costs. Extended operating hours can introduce new funding sources and counterparties from previously incompatible time zones and reduce the need for setting aside precautionary liquidity to support periods when liquidity is low or unavailable.
The combination of new supply and lower buffer demand can serve to lower overall funding costs, while trading and settlement activity currently concentrated into sharp peaks around market opens may distribute more evenly, smoothing liquidity throughout the day.
Always-on markets can also introduce new sources of short-term liquidity — including intraday borrowing — that better match the timing of funding needs. In response, the market may need to update its approach to overnight funding. A repo booked at 20:00 that will mature well before the following evening has different economics than traditional overnight funding booked at 08:00.
Supporting a more continuous operating model will likely require updated location and staffing strategies. Institutions will also adopt new operating models at different speeds. Successful collateral platforms will develop offerings that accommodate varying states of client readiness and retain the connection points to adjacent services that clients rely upon today. A key part of our holistic always-on strategy at BNY is to deliver a complete set of supported trade types and asset financing models by deepening the integration between our clearing, custody, and collateral platforms at all hours of the day.
A hybrid future: Traditional, tokenised, and native digital assets
Another force rapidly reshaping the collateral ecosystem is the advance of digital technology. Collateral platforms rely on the ledgers and custody infrastructure of affiliated or partner custody banks. Their physical custody network and pricing sources limit the scope of assets they can support; separate ledgers for deliverable and triparty transactions limit genuinely atomic settlement.
Digital collateral technology can now unify assets into a single, programmable ledger with immutable books and records. This allows for the recording of tokenised alternative and physical assets in collateral transactions on the same digital ledger as the most commonly-traded securities in the world.
Unified digital layers also enable dynamic, atomic settlement — synchronising legs that are traditionally settled separately. That reduces the counterparty risk and temporary liquidity outflows required by those separate settlements. For example, multi-leg trades like borrow-pledge structures could be settled atomically to minimise liquidity outlays.
Smart contract-enabled workflows, particularly those deployed to aid in always-on operating models, can create functional leverage by automating predefined actions such as eligibility checks, substitutions, and margin movements under controlled conditions.
For the foreseeable future, the global collateral ecosystem is likely to be hybrid. As with always-on operating models, adoption is unlikely to proceed at the same pace across asset classes, jurisdictions, or client segments. As a result, traditional, tokenised, and natively digital assets will coexist -— working together in concert — and require holistic visibility and management capabilities.
Practical use cases that address known frictions and deliver quantifiable value to specific segments will likely see earliest adoption. Different asset types may serve partially overlapping liquidity, financing, risk, and operational needs, while new forms of digital cash and tokenised securities can expand the pools of assets available as collateral.
Data, insight, and orchestration as sources of efficiency
The third force reshaping collateral is the growing importance of data and intelligence. Collateral decisions have always depended on a picture of what is held, what can be moved, and what can be deployed, but this picture has mostly been fragmented across accounts, custodians, entities, and rails. Data processing, normalisation, and analysis capabilities have been supercharged by AI, allowing those fragments to be connected and immediately acted on, whether by autonomous agents or humans equipped with AI-powered insights.
The stakes only rise as the picture grows more complex. New regulations, asset classes, and operating models multiply the trade-offs in play. Always-on and digital collateral capabilities expand what can be done, but realising value from those capabilities depends on understanding the trade-offs to relevant constraints — and quickly taking action.
Insights — including integrated views of collateral inventory across accounts and custodians in both digital and traditional environments — can help firms understand what assets are available, how quickly they can be mobilised, and what constraints apply. From there they can be deployed to optimise liquidity impact, opportunity cost, and balance sheet usage. Proactive signals and early-warning systems further support better decision-making by bringing attention to potential opportunities or issues.
Orchestration connects data, insights, and execution across funding, collateral, and liquidity to optimally utilise funding channels and collateral balances. Orchestration becomes even more important and complex in an environment where collateral may move across time zones, entities, servicing models and, increasingly, both traditional and digital rails. AI can improve speed and efficiency by helping identify optimisations more quickly and automating workflows within appropriate governance and control frameworks.
At BNY, we see this orchestration layer as central to the future of collateral management: connecting insight, execution, and control across funding, liquidity, and asset-mobility workflows.
The next phase of collateral evolution: What are the priorities?
Collectively, these developments are prompting the market to revisit fundamental conventions and concepts such as business day cutoffs and fails management against a new backdrop, with implications for critical processes and risk models. Taken together, the three trends point to three implications for how participants should respond.
The move toward continuous markets makes resilience a priority: longer operating windows require updated exception management, service continuity, and control frameworks, alongside a willingness to revisit the settlement-timing assumptions embedded in limits and buffers.
The advance of digital technology makes interoperability essential. As traditional, tokenised, and native digital assets coexist, participants need connectivity across central counterparties, custodians, and settlement venues, and the integrated custody relationships that make collateral genuinely mobile across them.
The growing importance of data and intelligence makes timely, automated decision-making a necessity — with AI increasingly driving rapid and comprehensive insights into asset availability, eligibility, and intraday requirements.
For BNY, these priorities converge in collateral infrastructure that brings resilience, interoperability, and intelligence together across increasingly interconnected liquidity, financing, and collateral ecosystems. As market structures continue to evolve, these capabilities will become critical in supporting efficiency and adaptability across the financial ecosystem.
Image: Cale Newhouse 
