BNY Mellon to leverage Baton System’s CCP network on its ECPO service

Rick Steves

“The union of Baton’s extensive CCP connectivity with the ground-breaking functionality of BNY Mellon’s ECPO service forms a powerful offering to cleared derivatives market participants.”

BNY Mellon has announced it will integrate Baton Systems’s Core-Collateral solution into its collateral management platform to enable mutual clients to optimise portfolio allocations and accelerate the mobilisation of cash and securities collateral across both uncleared and cleared margin obligations globally.

The enterprise collateral optimization solution will combine Baton’s DLT-powered post-trade processing and expansive CCP network with BNY Mellon’s collateral management service.

The integration is contingent upon the execution of a definitive collaboration agreement, which is expected to be completed in the near term.

“A powerful offering to cleared derivatives market participants”

Victor O’Laughlen, Digital Business Leader at BNY Mellon, said: “We’re excited about the tremendous potential this joint service presents to our clients, empowering them to optimise, mobilise and connect all of their collateral needs across different products and venues. Working with Baton, we will be delivering a solution at the leading edge of innovation.”

Jerome Kemp, President at Baton Systems, commented: “We at Baton Systems are excited to be launching our collaboration with BNY Mellon. The union of Baton’s extensive CCP connectivity with the ground-breaking functionality of BNY Mellon’s ECPO service forms a powerful offering to cleared derivatives market participants. The rapid mobilisation of assets and the enhanced optimisation of margin collateralisation is a game changer for the market.”

Rising interest rates and volatility raises stakes for collateral

The need for clients to manage and optimize the value and composition of the collateral they post across all of their relevant obligations is greater than ever due to rising interest rates and volatility.

Baton’s established CCP network and BNY Mellon’s Enterprise Continuous Portfolio Optimisation (ECPO) service will together support clients in reducing funding costs and improving profitability while increasing the velocity of collateral to better manage risk, the firms argue.

The solution will also see BNY Mellon’s collateral management system orchestrating the collateral allocation workflow and reporting for a consistent client experience across triparty repo, securities lending, and cleared / uncleared derivatives margining.

Baton’s CCP network includes major CCPs globally, comprising more than 93% of cleared margin posted by U.S. registered FCMs. The firm has plans to onboard additional CCPs across the globe in coming months.

Baton Systems is bringing a new kind of post-trade processing to the fore: fully connected, friction-free, flexible and transparent with the use of distributed ledger technology. The Silicon Valley firm introduced interoperable and connected digital market infrastructures from trade matching through to settlement and already facilitates the movement of billions of dollars of cash and securities on a daily basis.

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