Collateral in motion: Why mobility is becoming the next competitive advantage
18 August 2026
As shorter settlement cycles, regulatory reform, and evolving market infrastructures reshape securities finance, Theodore Law explores why collateral mobility has become a strategic priority, how fragmentation is limiting efficiency, and why optimisation increasingly depends on better decision-making rather than simply moving assets
Image: stock.adobe.com/Qbertstudio
Collateral has long supported securities lending, repo, derivatives, and clearing activity. However, recently its role has changed significantly. Once viewed primarily as an operational requirement, collateral is increasingly being managed as a strategic resource that influences liquidity, funding, and capital efficiency.
Regulatory reform has been a key driver of this shift. Basel III, Uncleared Margin Rules (UMR), mandatory clearing obligations, and liquidity requirements such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), have increased demand for high-quality liquid assets (HQLA).
At the same time, firms are managing larger collateral inventories spread across custodians, central securities depositories (CSDs), central counterparties (CCPs), triparty agents, and bilateral relationships. Each operates with different eligibility requirements, settlement processes, and operational constraints, making efficient mobilisation increasingly important.
Market stress has highlighted the consequences of limited collateral flexibility. The Covid-19 volatility of 2020, the UK liability-driven investment (LDI) crisis in 2022, and the banking sector disruption surrounding Silicon Valley Bank and Credit Suisse, demonstrated how quickly liquidity pressures can emerge when margin requirements increase.
Firms able to identify and redeploy collateral quickly were generally better positioned to respond than those operating with fragmented inventories and limited visibility.
鈥淗istorically, firms tended to focus on the availability of collateral,鈥� says Gael Delaunay, head of collateral management at Clearstream. 鈥淭oday, the focus is increasingly on the ability to access, mobilise, and deploy collateral efficiently across multiple venues, counterparties, and jurisdictions.鈥�
The shift reflects a broader change across securities finance. Holding collateral is no longer enough; firms increasingly need to understand where assets sit, how they can be used, and where they create the greatest value.
T+1 accelerates the challenge
The move towards shorter settlement cycles is reinforcing this trend.
Following the US transition to T+1 settlement in 2024, Europe is preparing to shorten its settlement cycle in October 2027. While the move is expected to reduce counterparty risk and improve efficiency, it also compresses the time available to source, allocate, and deliver collateral.
Processes that once took an entire trading day now need to be completed within hours. This requires firms to have greater visibility across collateral pools and make allocation decisions faster.
Many institutions, however, continue to manage collateral through separate business lines and technology platforms. Securities lending, repo, treasury, derivatives, and clearing functions often optimise assets independently, making it difficult to establish an enterprise-wide view.
James Stillwell, director of product management, collateral, and digital assets at Pirum, says the industry鈥檚 focus has shifted from availability to decision-making.
鈥淚t used to be about whether you had the collateral, but now it鈥檚 about whether you can make the right call on it quickly enough to act. The movement itself has never been the hard part 鈥� the decision is.鈥�
As settlement windows shorten, firms must balance competing requirements across liquidity, funding, regulation, and collateral eligibility within increasingly limited timeframes.
鈥淔irms continue to face pressure to improve returns, optimise liquidity, and make more efficient use of capital,鈥� says Delaunay. 鈥淎s a result, collateral is increasingly being managed as an economic resource that should be actively deployed rather than passively held.鈥�
Fragmentation remains the key obstacle
For many institutions, the challenge is not a shortage of collateral but an inability to access and understand what they already hold.
The International Securities Lending Association (ISLA) says firms increasingly struggle to obtain a consolidated view of collateral held across legal entities, business lines, and market infrastructures.
Assets may exist within an organisation but remain difficult to deploy because of operational silos, settlement locations, eligibility restrictions, or governance frameworks. This can result in firms sourcing collateral externally despite holding suitable assets elsewhere on their balance sheet.
Fragmentation also extends across the wider market. Collateral is distributed across custodians, CCPs, CSDs, triparty agents, and bilateral counterparties, each with its own processes and connectivity requirements.
鈥淚nventory has never been more disparate,鈥� says Stillwell. 鈥淚t sits across triparty agents, bilateral books, and CCPs, each with its own eligibility rules, formats and cut-off times, and no single venue sees the whole picture.鈥�
For firms seeking to optimise collateral, visibility has become the essential first step. Without a complete view of available assets, even sophisticated optimisation strategies have limited impact.
From visibility to optimisation
Collateral optimisation has traditionally focused on identifying the cheapest eligible asset to deliver against a specific obligation. While cost remains important, firms are increasingly required to consider a wider range of factors, including liquidity requirements, funding costs, regulatory constraints, and balance sheet efficiency.
鈥淐heapest-to-deliver is one input, not the answer,鈥� says Stillwell.
An asset that appears cheapest to allocate may ultimately have greater value elsewhere when broader funding and liquidity considerations are taken into account.
Stephen O鈥橠onnell, chief operating officer at ISLA, says firms with mature collateral mobility capabilities typically share three characteristics: strong visibility across inventories, connectivity with market infrastructures and counterparties, and optimisation models that incorporate wider liquidity and funding considerations.
The market response is also becoming increasingly varied. Large dealer banks are investing in enterprise-wide collateral platforms to coordinate assets across business lines and jurisdictions. Custodians and triparty providers are improving connectivity between infrastructures, while many buy side firms are relying on specialist technology providers to improve visibility without building extensive internal systems.
鈥淢arket participants need a consolidated view of their assets, exposures, and funding requirements across custodians, market infrastructures, and jurisdictions,鈥� says Delaunay. 鈥淲ithout that transparency, it becomes difficult to make informed optimisation decisions.鈥�
For the industry as a whole, the objective is becoming clear: make fragmented collateral behave like a connected ecosystem.
From automation to orchestration
Technology has transformed collateral management over the past decade. Straight-through processing, APIs, and automated workflows have reduced manual intervention, while triparty collateral management has improved allocation, substitution, and settlement.
However, automation has largely addressed individual processes rather than the wider challenge of coordinating collateral across fragmented infrastructures.
鈥淚鈥檇 be careful about where the real friction sits,鈥� says Stillwell. 鈥淚nside a single triparty venue, allocation, substitution, and optimisation are already highly automated and work well. The friction is at the seams.鈥�
Those seams increasingly exist between infrastructures rather than within them.
Moving collateral between custodians, CCPs, triparty agents, and bilateral counterparties can introduce delays, settlement risk, and operational complexity. As firms connect to more markets and manage assets across more jurisdictions, the ability to coordinate those movements has become as important as automating individual processes.
This is driving greater interest in collateral orchestration: technology and operating models designed to connect existing infrastructure rather than replace it. The aim is to provide firms with a consolidated view of inventory while identifying the most efficient way to mobilise assets across multiple venues.
For many institutions, the next challenge is not developing more advanced optimisation models, but executing those decisions consistently across different market infrastructures and within shorter settlement windows.
鈥淢oving the wrong asset in seconds is still moving the wrong asset,鈥� says Stillwell.
The value of orchestration therefore lies in the intelligence behind the movement. Firms increasingly need technology capable of considering funding costs, liquidity requirements, regulatory constraints, and settlement considerations before recommending how collateral should be deployed.
As the market moves towards faster settlement cycles and more complex collateral requirements, the ability to make the right decision will become just as important as the ability to execute it quickly.
Interoperability will define the next phase
Alongside improvements to existing infrastructure, the industry is exploring how emerging technologies could reshape collateral mobility.
Digital assets and distributed ledger technology (DLT) have attracted attention because of their potential to reduce settlement friction, improve transparency, and enable greater automation. Tokenisation could allow firms to transfer ownership or control of assets more efficiently, potentially expanding the range of collateral available to market participants.
鈥淭okenisation and pledge models let a firm transfer ownership or control while the security stays where it is, so the value moves without the asset having to,鈥� says Stillwell.
However, technology alone will not solve the industry鈥檚 underlying challenges.
For O鈥橠onnell, one of the key risks is that new digital markets could reproduce the fragmentation already present in traditional infrastructure. 鈥淭he industry must avoid recreating existing fragmentation within new digital environments.鈥�
The future of collateral management will therefore depend on interoperability. Common standards and legal frameworks will be required to connect traditional custody networks with emerging digital infrastructures.
This is one reason why ISLA continues to develop initiatives such as the Common Domain Model (CDM), which provides a common representation of securities finance data and events, alongside the Digital Assets Annexes to the Global Master Securities Lending Agreement (GMSLA), designed to provide legal certainty for transactions involving digital assets and tokenised securities.
Whether collateral remains within established market infrastructure or moves into digitally enabled environments, the requirement remains the same: firms must be able to identify, mobilise, and deploy assets efficiently.
The next competitive advantage
Collateral mobility has moved from an operational consideration to a strategic capability.
Shorter settlement cycles, increasing margin requirements, and more complex market structures are forcing firms to rethink how collateral is managed across the organisation. The institutions best positioned for this environment will not necessarily be those holding the largest collateral pools, but those able to understand where assets sit, evaluate competing demands, and deploy them effectively.
The next stage of collateral management will be defined by connectivity. Firms are moving away from isolated optimisation initiatives and towards broader strategies that link inventories, infrastructures, and decision-making processes.
Technology will remain central to that transformation, but automation alone will not determine success. Interoperability, common standards, and the ability to coordinate fragmented markets will be equally important.
The industry has spent years improving its ability to process collateral. The next challenge is improving its ability to orchestrate it.
As securities finance enters a more interconnected era, collateral itself may become less of a differentiator. The competitive advantage will come from the intelligence surrounding it: knowing what assets are available, understanding where they create the most value, and mobilising them when markets demand it.
The future of collateral management will not be defined by the size of a firm鈥檚 inventory, but by its ability to make that inventory work.
Regulatory reform has been a key driver of this shift. Basel III, Uncleared Margin Rules (UMR), mandatory clearing obligations, and liquidity requirements such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), have increased demand for high-quality liquid assets (HQLA).
At the same time, firms are managing larger collateral inventories spread across custodians, central securities depositories (CSDs), central counterparties (CCPs), triparty agents, and bilateral relationships. Each operates with different eligibility requirements, settlement processes, and operational constraints, making efficient mobilisation increasingly important.
Market stress has highlighted the consequences of limited collateral flexibility. The Covid-19 volatility of 2020, the UK liability-driven investment (LDI) crisis in 2022, and the banking sector disruption surrounding Silicon Valley Bank and Credit Suisse, demonstrated how quickly liquidity pressures can emerge when margin requirements increase.
Firms able to identify and redeploy collateral quickly were generally better positioned to respond than those operating with fragmented inventories and limited visibility.
鈥淗istorically, firms tended to focus on the availability of collateral,鈥� says Gael Delaunay, head of collateral management at Clearstream. 鈥淭oday, the focus is increasingly on the ability to access, mobilise, and deploy collateral efficiently across multiple venues, counterparties, and jurisdictions.鈥�
The shift reflects a broader change across securities finance. Holding collateral is no longer enough; firms increasingly need to understand where assets sit, how they can be used, and where they create the greatest value.
T+1 accelerates the challenge
The move towards shorter settlement cycles is reinforcing this trend.
Following the US transition to T+1 settlement in 2024, Europe is preparing to shorten its settlement cycle in October 2027. While the move is expected to reduce counterparty risk and improve efficiency, it also compresses the time available to source, allocate, and deliver collateral.
Processes that once took an entire trading day now need to be completed within hours. This requires firms to have greater visibility across collateral pools and make allocation decisions faster.
Many institutions, however, continue to manage collateral through separate business lines and technology platforms. Securities lending, repo, treasury, derivatives, and clearing functions often optimise assets independently, making it difficult to establish an enterprise-wide view.
James Stillwell, director of product management, collateral, and digital assets at Pirum, says the industry鈥檚 focus has shifted from availability to decision-making.
鈥淚t used to be about whether you had the collateral, but now it鈥檚 about whether you can make the right call on it quickly enough to act. The movement itself has never been the hard part 鈥� the decision is.鈥�
As settlement windows shorten, firms must balance competing requirements across liquidity, funding, regulation, and collateral eligibility within increasingly limited timeframes.
鈥淔irms continue to face pressure to improve returns, optimise liquidity, and make more efficient use of capital,鈥� says Delaunay. 鈥淎s a result, collateral is increasingly being managed as an economic resource that should be actively deployed rather than passively held.鈥�
Fragmentation remains the key obstacle
For many institutions, the challenge is not a shortage of collateral but an inability to access and understand what they already hold.
The International Securities Lending Association (ISLA) says firms increasingly struggle to obtain a consolidated view of collateral held across legal entities, business lines, and market infrastructures.
Assets may exist within an organisation but remain difficult to deploy because of operational silos, settlement locations, eligibility restrictions, or governance frameworks. This can result in firms sourcing collateral externally despite holding suitable assets elsewhere on their balance sheet.
Fragmentation also extends across the wider market. Collateral is distributed across custodians, CCPs, CSDs, triparty agents, and bilateral counterparties, each with its own processes and connectivity requirements.
鈥淚nventory has never been more disparate,鈥� says Stillwell. 鈥淚t sits across triparty agents, bilateral books, and CCPs, each with its own eligibility rules, formats and cut-off times, and no single venue sees the whole picture.鈥�
For firms seeking to optimise collateral, visibility has become the essential first step. Without a complete view of available assets, even sophisticated optimisation strategies have limited impact.
From visibility to optimisation
Collateral optimisation has traditionally focused on identifying the cheapest eligible asset to deliver against a specific obligation. While cost remains important, firms are increasingly required to consider a wider range of factors, including liquidity requirements, funding costs, regulatory constraints, and balance sheet efficiency.
鈥淐heapest-to-deliver is one input, not the answer,鈥� says Stillwell.
An asset that appears cheapest to allocate may ultimately have greater value elsewhere when broader funding and liquidity considerations are taken into account.
Stephen O鈥橠onnell, chief operating officer at ISLA, says firms with mature collateral mobility capabilities typically share three characteristics: strong visibility across inventories, connectivity with market infrastructures and counterparties, and optimisation models that incorporate wider liquidity and funding considerations.
The market response is also becoming increasingly varied. Large dealer banks are investing in enterprise-wide collateral platforms to coordinate assets across business lines and jurisdictions. Custodians and triparty providers are improving connectivity between infrastructures, while many buy side firms are relying on specialist technology providers to improve visibility without building extensive internal systems.
鈥淢arket participants need a consolidated view of their assets, exposures, and funding requirements across custodians, market infrastructures, and jurisdictions,鈥� says Delaunay. 鈥淲ithout that transparency, it becomes difficult to make informed optimisation decisions.鈥�
For the industry as a whole, the objective is becoming clear: make fragmented collateral behave like a connected ecosystem.
From automation to orchestration
Technology has transformed collateral management over the past decade. Straight-through processing, APIs, and automated workflows have reduced manual intervention, while triparty collateral management has improved allocation, substitution, and settlement.
However, automation has largely addressed individual processes rather than the wider challenge of coordinating collateral across fragmented infrastructures.
鈥淚鈥檇 be careful about where the real friction sits,鈥� says Stillwell. 鈥淚nside a single triparty venue, allocation, substitution, and optimisation are already highly automated and work well. The friction is at the seams.鈥�
Those seams increasingly exist between infrastructures rather than within them.
Moving collateral between custodians, CCPs, triparty agents, and bilateral counterparties can introduce delays, settlement risk, and operational complexity. As firms connect to more markets and manage assets across more jurisdictions, the ability to coordinate those movements has become as important as automating individual processes.
This is driving greater interest in collateral orchestration: technology and operating models designed to connect existing infrastructure rather than replace it. The aim is to provide firms with a consolidated view of inventory while identifying the most efficient way to mobilise assets across multiple venues.
For many institutions, the next challenge is not developing more advanced optimisation models, but executing those decisions consistently across different market infrastructures and within shorter settlement windows.
鈥淢oving the wrong asset in seconds is still moving the wrong asset,鈥� says Stillwell.
The value of orchestration therefore lies in the intelligence behind the movement. Firms increasingly need technology capable of considering funding costs, liquidity requirements, regulatory constraints, and settlement considerations before recommending how collateral should be deployed.
As the market moves towards faster settlement cycles and more complex collateral requirements, the ability to make the right decision will become just as important as the ability to execute it quickly.
Interoperability will define the next phase
Alongside improvements to existing infrastructure, the industry is exploring how emerging technologies could reshape collateral mobility.
Digital assets and distributed ledger technology (DLT) have attracted attention because of their potential to reduce settlement friction, improve transparency, and enable greater automation. Tokenisation could allow firms to transfer ownership or control of assets more efficiently, potentially expanding the range of collateral available to market participants.
鈥淭okenisation and pledge models let a firm transfer ownership or control while the security stays where it is, so the value moves without the asset having to,鈥� says Stillwell.
However, technology alone will not solve the industry鈥檚 underlying challenges.
For O鈥橠onnell, one of the key risks is that new digital markets could reproduce the fragmentation already present in traditional infrastructure. 鈥淭he industry must avoid recreating existing fragmentation within new digital environments.鈥�
The future of collateral management will therefore depend on interoperability. Common standards and legal frameworks will be required to connect traditional custody networks with emerging digital infrastructures.
This is one reason why ISLA continues to develop initiatives such as the Common Domain Model (CDM), which provides a common representation of securities finance data and events, alongside the Digital Assets Annexes to the Global Master Securities Lending Agreement (GMSLA), designed to provide legal certainty for transactions involving digital assets and tokenised securities.
Whether collateral remains within established market infrastructure or moves into digitally enabled environments, the requirement remains the same: firms must be able to identify, mobilise, and deploy assets efficiently.
The next competitive advantage
Collateral mobility has moved from an operational consideration to a strategic capability.
Shorter settlement cycles, increasing margin requirements, and more complex market structures are forcing firms to rethink how collateral is managed across the organisation. The institutions best positioned for this environment will not necessarily be those holding the largest collateral pools, but those able to understand where assets sit, evaluate competing demands, and deploy them effectively.
The next stage of collateral management will be defined by connectivity. Firms are moving away from isolated optimisation initiatives and towards broader strategies that link inventories, infrastructures, and decision-making processes.
Technology will remain central to that transformation, but automation alone will not determine success. Interoperability, common standards, and the ability to coordinate fragmented markets will be equally important.
The industry has spent years improving its ability to process collateral. The next challenge is improving its ability to orchestrate it.
As securities finance enters a more interconnected era, collateral itself may become less of a differentiator. The competitive advantage will come from the intelligence surrounding it: knowing what assets are available, understanding where they create the most value, and mobilising them when markets demand it.
The future of collateral management will not be defined by the size of a firm鈥檚 inventory, but by its ability to make that inventory work.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities 麻豆影视传媒 Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities 麻豆影视传媒 Times
