Bank of New York is poised to announce the launch of the new global collateral management system the bank has developed over the last two years.
The new system, called the Dynamic Continuous Optimisation (DCO) service, aims to deliver what collateral managers have sought for years: an algorithm that allocates available capital to its most profitable use, automatically. The dynamism stems from the fact that the system will never operate in a static environment: both the collateral available, and the uses to which it can be put, alter continuously. BNY says that DCO has overcome the problem of managing collateral in dynamic market conditions, through the use of a set of proprietary algorithms rather than technology alone.
The launch of DCO will be greeted sceptically by the securities financing community, which has learnt the limitations of previous collateral optimisation tools. Its impact will also depend to a large extent on the ability of broker-dealers to overcome the product and geographical barriers between the different parts of their own firm and centralise collateral management on a global scale. But BNY says that, in one simulation – presumably with Goldman Sachs, its long-term partner in tri-party securities financing product development- DCO optimised a portfolio of securities down to an unused amount of just $2,000.
“The implementation of DCO is another step in the evolution of our global collateral management product,” says Art Certosimo, SVP and head of broker dealer services at Bank of New York in New York. “We are pleased that we can now offer our clients the ability to maximise usage of their collateral pool globally and across all of their relationships in our programme. Our priority is meeting our clients’ needs, and we are committed to allocating the resources required to provide them with state-of-the-art capabilities.”