Phase Six and Beyond

Now, back to this operational question that I kind of unpicked earlier.

All of this would, of course, be much easier if we had automated collateral workflows.

It feels like to me that in so many of the regulatory implementations, whether it was phase one or phase six or reg reporting, some of these other things, it was all about getting compliance and getting over the line to make sure you're in compliance.

And then we're kind of thinking, the industry's kind of thinking about, oh, wow, maybe there's a better way to do this.

Is there maybe a different way, a more optimized, more automated way? Let's start with Wayne on that one.

I think that's a lot of good points, Scott.

You know, when I think about automation, this is a journey.

I don't know that we necessarily know what the finish line is going to be for that journey.

And as we've worked through the challenges of UMR, what I found is that it certainly has been a prioritization on our part to look at what's going to be most critical for the delivery of services related to UMR that has tended to be very focused on elements such as the up information to make sure that we have common views for our clients.

I think we've been very focused in aspects such as that.

When we think about it, though, it really does highlight there's still other elements of the process that still are somewhat manual on how we go about doing things.

And so I think as we now look ahead, I think one thing is clear to me, UMR has been a catalyst for change.

It's highlighted areas that we need to focus on.

But in a lot of cases, we didn't have the technology or the the investment to be able to put it towards these others so i think many of us are going to be as we think ahead to our 2023 2024 planning there's other areas we want to be focusing on how it benefits not just tc but you know again it highlights the need for collateral and other products TBAs, how we collateralize those, secondary collateral and repos, clients that are utilizing lines of credit.

Again, you're talking about a very common process and where we can apply the lessons learned and the principles.

It's only going to benefit us across a multitude of disciplines here.

Liz, what areas of collateral management process are most in the need of further automation and what benefits could they bring here?

Getting different systems to talk to each other, it would be so wonderful to have that view where you've got your margining data, your margin dispute data, and your settlements data kind of all lined up and contributing to a single report.

I think that is an area that needs to be improved.

A lot of the settlement systems that we have now They assume contractual settlement is successful and you don't find about failures until the next day.

So real-time settlements information that would be housed in a different application but fed into the collateral management system.

One of the areas that we thought this would greatly improve is the concept of collateral spikes and ensuring that you're not returning independent amounts or initial margin or even variation margin back to your counterparty if a transactional cash flow did not settle successfully.

And if you don't know about that until the next day, you may inadvertently return some collateral that you probably shouldn't have.

So that kind of holistic view or a hub where different applications are talking to each other and where you could produce a report that brings all that data in, that I think would be hugely beneficial, particularly in these markets that we're encountering right now.

So what needs to happen to achieve that objective, to digitize and automate more of this product so you have your info hub or your dashboard right in front of you to see what the cheapest to deliver is and what the status of all your collateral is? What steps need to be taken?

Now, back to this operational question that I kind of unpicked earlier.

All of this would, of course, be much easier if we had automated collateral workflows.

It feels like to me that in so many of the regulatory implementations, whether it was phase one or phase six or reg reporting, some of these other things, it was all about getting compliance and getting over the line to make sure you're in compliance.

And then we're kind of thinking, the industry's kind of thinking about, oh, wow, maybe there's a better way to do this.

Is there maybe a different way, a more optimized, more automated way? Let's start with Wayne on that one.

I think that's a lot of good points, Scott.

You know, when I think about automation, this is a journey.

I don't know that we necessarily know what the finish line is going to be for that journey.

And as we've worked through the challenges of UMR, what I found is that it certainly has been a prioritization on our part to look at what's going to be most critical for the delivery of services related to UMR that has tended to be very focused on elements such as the up information to make sure that we have common views for our clients.

I think we've been very focused in aspects such as that.

When we think about it, though, it really does highlight there's still other elements of the process that still are somewhat manual on how we go about doing things.

And so I think as we now look ahead, I think one thing is clear to me, UMR has been a catalyst for change.

It's highlighted areas that we need to focus on.

But in a lot of cases, we didn't have the technology or the the investment to be able to put it towards these others so i think many of us are going to be as we think ahead to our 2023 2024 planning there's other areas we want to be focusing on how it benefits not just tc but you know again it highlights the need for collateral and other products TBAs, how we collateralize those, secondary collateral and repos, clients that are utilizing lines of credit.

Again, you're talking about a very common process and where we can apply the lessons learned and the principles.

It's only going to benefit us across a multitude of disciplines here.

Liz, what areas of collateral management process are most in the need of further automation and what benefits could they bring here?

Getting different systems to talk to each other, it would be so wonderful to have that view where you've got your margining data, your margin dispute data, and your settlements data kind of all lined up and contributing to a single report.

I think that is an area that needs to be improved.

A lot of the settlement systems that we have now They assume contractual settlement is successful and you don't find about failures until the next day.

So real-time settlements information that would be housed in a different application but fed into the collateral management system.

One of the areas that we thought this would greatly improve is the concept of collateral spikes and ensuring that you're not returning independent amounts or initial margin or even variation margin back to your counterparty if a transactional cash flow did not settle successfully.

And if you don't know about that until the next day, you may inadvertently return some collateral that you probably shouldn't have.

So that kind of holistic view or a hub where different applications are talking to each other and where you could produce a report that brings all that data in, that I think would be hugely beneficial, particularly in these markets that we're encountering right now.

So what needs to happen to achieve that objective, to digitize and automate more of this product so you have your info hub or your dashboard right in front of you to see what the cheapest to deliver is and what the status of all your collateral is? What steps need to be taken?