ISLA Americas: A collateral state of mind — from equity-to-equity to tokenisation
15 October 2026 US
Image: Felix Mizioznikov/stock.adobe.com
Collateral is an enormous component of businesses, and it relies on the infrastructure supporting it. When market participants think of collateral demand, their thoughts may go to regulation, growth balance sheet, and intensive trading strategies. This monetisation is equally as important as the functional role the collateral plays, according to the ‘Collateral as Currency’ panel at the ISLA Americas 3rd Annual Securities Finance & Collateral Management Conference.
With Basel III on the minds of many in the collateral market, one speaker expects to see a relief for banks — but it “won’t be a silver bullet”. Tier one capital may receive relief, which could in turn put more of a spotlight on balance sheet and funding liquidity.
To be more efficient in these trades, the market is already focused on negative agreements, term structures, and guarantees, which will continue to be important.
For firms “looking to stay relevant”, one panellist advised being involved in equity-for-equity (E4E), which also provides capital relief. This E4E relief reduces the need for broker-dealers to employ a two-transaction model for facilitating customer short sales. Under that model, broker-dealers repo or pledge customer equities and receive cash to help fund long purchases while posting cash collateral to the same counterparty to borrow equities used to facilitate short sales or other transactions.
One panellist believes that the level of coordination or necessity for coordination between the different balance sheet intensive financing businesses has been high. Equity market performance; the potential path for central banks; and the asymmetry of growth in different regions, given how the AI trade is playing out, are all driving a requirement for coordination.
The panel went on to discuss how broker-dealers are balancing efficiency with risk discipline, what beneficial owners are demanding in return, and what the pressure on margins means for how collateral will be priced, moved, and optimised.
Coming together, the panel then reviewed the future and the opportunities ahead. One perspective indicates that this is a world where there are many new dynamics evolving. There are many opportunities available to the market on the collateral front, whether that be via triparty or tokenisation — a path that provides flexibility for participants.
The panellists indicated that if some of the most risk-averse investors in the front end of the markets are embracing this technology, it is a harbinger of things to come. Firms will need to be thoughtful about how they implement tokenisation, as every firm is different.
Moving forward, one panellist pinpointed the importance of collateral mobility, both within internal firms and within the interconnectedness of the industry. In addition to this, firms are also thinking about Europe’s move to T+1, as well as tokens and the next level of digital assets.
In terms of the use of tokenisation in collateral management, the path forward for one speaker is ease and open access, interoperability, and the pathway to 24/7 trading.
Concluding on whether tokenisation will become the norm in the collateral market, the panel heard that the market is closer than ever after this panel.
With Basel III on the minds of many in the collateral market, one speaker expects to see a relief for banks — but it “won’t be a silver bullet”. Tier one capital may receive relief, which could in turn put more of a spotlight on balance sheet and funding liquidity.
To be more efficient in these trades, the market is already focused on negative agreements, term structures, and guarantees, which will continue to be important.
For firms “looking to stay relevant”, one panellist advised being involved in equity-for-equity (E4E), which also provides capital relief. This E4E relief reduces the need for broker-dealers to employ a two-transaction model for facilitating customer short sales. Under that model, broker-dealers repo or pledge customer equities and receive cash to help fund long purchases while posting cash collateral to the same counterparty to borrow equities used to facilitate short sales or other transactions.
One panellist believes that the level of coordination or necessity for coordination between the different balance sheet intensive financing businesses has been high. Equity market performance; the potential path for central banks; and the asymmetry of growth in different regions, given how the AI trade is playing out, are all driving a requirement for coordination.
The panel went on to discuss how broker-dealers are balancing efficiency with risk discipline, what beneficial owners are demanding in return, and what the pressure on margins means for how collateral will be priced, moved, and optimised.
Coming together, the panel then reviewed the future and the opportunities ahead. One perspective indicates that this is a world where there are many new dynamics evolving. There are many opportunities available to the market on the collateral front, whether that be via triparty or tokenisation — a path that provides flexibility for participants.
The panellists indicated that if some of the most risk-averse investors in the front end of the markets are embracing this technology, it is a harbinger of things to come. Firms will need to be thoughtful about how they implement tokenisation, as every firm is different.
Moving forward, one panellist pinpointed the importance of collateral mobility, both within internal firms and within the interconnectedness of the industry. In addition to this, firms are also thinking about Europe’s move to T+1, as well as tokens and the next level of digital assets.
In terms of the use of tokenisation in collateral management, the path forward for one speaker is ease and open access, interoperability, and the pathway to 24/7 trading.
Concluding on whether tokenisation will become the norm in the collateral market, the panel heard that the market is closer than ever after this panel.
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