Collateral Solutions
for a Changing Market:
Collateral Management and Collateral Segregation
July 2016

Table of Contents

4 SECTION 1: Introduction
6 SECTION 2: Challenges and Solutions
16 SECTION 3: Case Studies
4: Consultant’s Corner –APAC, EMEA and US
18 SECTION
22 SECTION 5: Conclusion
24 SECTION 6: Contributors

SECTION 1 Introduction
JAMES MALGIERI

Executive Vice President
BNY Mellon Markets“Collateral Solutions for a Changing Market:
Collateral Management and Collateral Segregation”
is the third in our series of papers on collateralmanagement. In the first paper, ”CollateralManagement: A Review of Market Issues”
BNY Mellon and The Field Effect examine thedevelopment of collateral management and identify
key issues in the current collateral landscapeincluding the anticipated difficulties in accessing
supply. The second BNY Mellon/Field Effect paper“Collateral Management: Navigating the Regulatory
Maze,” shines the spotlight on specific industry
regulations and directives by distilling their aims
and objectives and considers the current and futurecollateral impacts and consequences. In this third
paper, we explore a range of innovative solutions
available from BNY Mellon that can help financial
institutions and institutional investors meet today’s
collateral challenges.
Collateral plays a central role in today’s financial
marketplace. Regulation and changing market
dynamics have moved collateral into the
spotlight, creating new challenges for market
participants as they pursue their trading andinvestment strategies. Indeed for collateralmanagement, the move continues from a classic
back office processing function to more of an
all-encompassing back-middle-front office
set of services, aims and objectives. Financial
institutions and broker-dealers face increasing
capital costs which have affected their trading
activities and made them more selective in how

they use their capital as collateral. This behaviourchange is having a ripple effect throughout themarket and is transforming how institutional
investors (e.g., pensions, insurance companies,
asset managers and corporate treasurers) viewand generate value and apply collateral. Today’s
market provides opportunities for institutional
investors to become more active in collateraltransformation and market supply, a role
traditionally seen as a function of the banks. In
addition, there is a growing list of transactions
requiring collateralisation which is transforming
the institutional investor business model. With
these trends, institutional investors will need tospend more time, energy and talent on managing
collateral and understanding how to use it
efficiently and effectively.
Many financial institutions and institutional
investors are also facing complex operationaland regulatory requirements across multiple
jurisdictions, and the cost and speed of regulatorychange is proving a challenge to all market players.
Many are discussing the feasibility of reusing
or leveraging existing business and operationalflows rather than trying to design, build or buy new
infrastructure and processes for new regulatory
requirements. We believe that many of thesefirms are looking for internal synergies and not,perhaps, something new and or complex, witha preference in some cases for standardisation
when possible. We are finding that the larger
financial institutions, broker-dealers and asset

4 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATION

managers are looking to leverage the existing setup of their repo and securities finance businesses
to cover exposure generated elsewhere, suchas with OTC derivatives, as they already have arobust technology and operational infrastructure
in place to support large transaction volumes. The
majority of other institutional investors, however,require more support to manage collateralfinancing, valuations, monitoring and reporting.
These post-trade activities are more efficiently
met by partnering with service providers who haveeffective solutions, established track records anda global reach to support asset owners where they
do business.
I think it is fair to say that we are at somewhat
of a tipping point for the collateral managementbusiness and those firms that operate in thismarket. The raft of regulatory driven changesof recent and coming years has forced many

to rethink what they have to do to succeed andperhaps create opportunities from what initiallyappear as challenges. The reality is that no one
firm can ‘do it all alone,’ and in many cases it isacceptable to partner with others or outsource
functions for the best results. I believe that therise of market infrastructure and emergence of
new technology and solution providers reflect thisneatly, and while we are going through a transition
period, the future is positive and will certainly be
different from today.
In the following pages, we explore the range ofsolutions that BNY Mellon has created working
side by side with our broker-dealer, financial
institution and institutional investor clients. We
continue to innovate as these market participants
seek solutions to help them operate effectively intoday’s changing market.

Sources and Uses of CollateralCentralBank
Services

Integrated
CollateralIssuance

ClearedTransactions(House /Client)Regulatory
Asset
Segregation

Tri-party
CollateralCollateral
Prime
Brokerage
Collateral
Segregation

Segregationof Initial
MarginOTCTransaction

Principal
Repo
Funding

Securities
Lending
Agency5 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONSECTION 2 Challenges and Solutions
STAFFAN AHLNERDOMINICK FALCOHead of Collateral Management Product Head of Collateral Segregation Product
BNY Mellon Markets
BNY Mellon Markets
As new regulations come into force, the impact on the demand for and supply of collateral is causing
the value of collateral to increase, resulting in a significant shift in the structure of the funding market.
In this section we list for you a range of ideas and options that may help you to manage your collateralprocess with heightened efficiency.

The Challenge:

Finding the Right Collateral for You
HELPING TRANSFORM ASSETS INTO THE RIGHTCOLLATERALCollateral demand is on the rise due to regulatory
requirements, including liquidity ratio calculations
and the upcoming margin rules for over-the-counter(OTC) derivatives trades. In particular, high quality
liquid assets (HQLA) (e.g., cash and US Treasuries)
are in shorter supply as regulations require thatbanks and broker-dealers keep HQLA on theirbalance sheets rather than using them as collateral
thereby suppressing HQLA availability andvelocity. European and US quantitative easing (QE)
programmes have further affected HQLA availability
by converting HQLA in the market to excess
balance sheet deposit liabilities with the banks.

Furthermore, re-use constraints on posted margin“lock up” the collateral with third-party custodians
which can also restrict collateral mobility.
With the growing demand for quality collateraland the increasing pace of regulatory change,market participants are seeking new collateralsources and ways to help them manage thetransformation process. BNY Mellon helps clientsmanage regulatory requirements and capital needs
and optimise their portfolio assets by continually
expanding the supply of assets accepted in its
collateral management programme. Please see thefollowing table for examples of how BNY Mellon
expands the supply of collateral.

6 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONBNY Mellon Solution:

Expanding the Supply of Collateral
Money
MarketFunds1

Collateral providers on BNY Mellon’s tri-party platform can invest cash into a broadarray of money market mutual funds accessed via BNY Mellon’s LiquidityDIRECTSM
investment portal with units from these funds then posted as collateral. BNY Mellon
provides the operational efficiency that can help with the:––initial investment into the money market mutual fund;––movement of fund units into collateral accounts; and––posting of fund units as collateral.
The process takes place in a straight-through processing environment via an
integrated technology platform.

Exchange
TradedFunds(ETFs)

When ETFs are used as collateral in tri-party, we simplify the process by offering
Markit ETF collateral lists. With these lists, clients can quickly add groups of ETFs
to their collateral schedules versus having to choose each ETF individually. For more
flexibility, collateral receivers can also exclude specific ETFs from each of the Markit
lists. Markit publishes its ETF collateral lists daily and makes additions to the lists
monthly according to their criteria.

ChineseRenminbi
AssetsOffshore Chinese Renminbi cash2 can be used in repo transactions and offshore
Chinese Renminbi assets3 can also be used as collateral in BNY Mellon’s collateralmanagement programme. The collateral assets in scope include offshore Chinese
Renminbi denominated bonds (Dim Sum Bonds) issued, listed and settled in Hong
Kong and offshore Chinese Renminbi denominated certificates of deposit settled in
Hong Kong. All offshore Chinese Renminbi securities accepted by BNY Mellon settle
at custody accounts held with the Central Moneymarkets Unit (CMU) of the Hong
Kong Monetary Authority.

Covered
Bonds

Another collateral option is covered bonds, specifically Danish mortgage bonds.
A limitation in using Danish mortgage bonds as collateral has been the quarterly
drawing procedures whereby a percentage of a bond’s issue would be called weeks
prior to record date before being redeemed early. The new partial redemption model
was introduced in 2015 to streamline the process, and we refined our collateralmanagement procedures to allow for only the redeemed portion of a bond to be
excluded from the allocation process on record date. The unredeemed portion ofa bond issue can be allocated over record date. Thus the use of Danish mortgage
bonds can be maximised for the entire year.

“We see great potential in ETFs as new collateral;they are liquid, fungible and easy to trade. Byoffering Markit ETF lists as part of our overallcollateral management solution, clients canseamlessly add these assets to their eligibility
schedules.” — Joe Keenan“Our clients need to view their collateralholistically across their organisations, but there
are costs associated with this holistic view – forexample the costs associated with buying newtechnology and then deploying and maintaining
it. To help manage these costs, clients canconsolidate assets on BNY Mellon’s collateralmanagement platform.” — John Templeton

7 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONThe Challenge:

Optimising Collateral and Finding Efficiencies
With regulation and market changes placing a premium on collateral, market participants need to be more
efficient when financing transactions. Allocating the least expensive collateral to each trade, having a fullview of which collateral is being used and which is available and applying efficient collateral management
techniques to a variety of transactions all help market participants use their eligible assets efficiently andmanage financing costs.
terms of financing, institutional investors may
Due to regulation, broker-dealers and financial
also find further opportunities in a peer-to-peer
institutions continue to deleverage and use
relationship, in which these buy-side firms are
longer-term financing structures rather thanshort-term wholesale funding. Heightened balance both the collateral provider and receiver.
Institutional investors are also emphasising risk
sheet controls make it ever more important for
management, asset optimisation and viewing
them to deploy collateral efficiently across theircollateral management holistically across theglobal asset pools. In response, broker-dealers
enterprise, making sure that the right assets areand financial institutions are finding new tradingin the right place at the right time.
techniques which are more balance sheet friendly
and more efficient in terms of collateral usage.
The move to the tri-party model continues as a
Swaps, secured notes and alternative collateralmeans to aggregate suitable collateral, optimise
forms (such as money market funds described
its selection and ultimate allocation. While the use
above) may help with balance sheet management
and are rising in popularity. In addition, some clients of a tri-party collateral management model wasare exploring the use of collateral pledge structures established in support of repo and securities lending,we see a future where collateral in a tri-party model
as opposed to transfer of title in order to achieve
is used to cover a range of exposures (cross-productbetter capital treatment for transactions.
tri-party). BNY Mellon is working alongside its clientsto help adopt new optimisation techniques into dayWe are beginning to see institutional investors
to-day operations. Please see the following table for
exploring how to use the tri-party model in addition
examples of BNY Mellon’s strategies for optimising
to the long established bilateral processing model,collateral and finding efficiencies.
providing them with a chance to leverage proventools and technology that broker-dealers have beenusing over the past two decades.
With broker-dealers being more selective inUsing Assets Efficiently

Optimising
Collateral
I

el II

Bas

LCR

e
Buy-Sid er-Pe
Peer-to lModeRisk nt
eme
anag

M

Pledge vs.
Transfer Title
Finding
Efficiencies

NSF

HQLA

R

SFT

Collateral
Transformation

R

Cross-Border
JGBs
Structured
Notes
Tri-Party
Structure

Collateral Portfolio
Transformation

Holistic
View of
Collateral

8 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONBNY Mellon Solution:

Strategies for Optimising Collateral and Finding Efficiencies

KoreanSecurities

BNY Mellon is invested in offering collateral pledge structures in multiple
jurisdictions. Japan and Korea are the latest markets to be added under thisstructure. In Korea, our solution is built upon our collateral management
programme’s efficiencies. The collateral provider holds a pool of available
collateral that can be used in a variety of pledge secured transactions, and thiscollateral pool is held in a custody account by BNY Mellon. Throughout the termof the trade, BNY Mellon performs standard tri-party servicing which includes
marking collateral to market daily, applying concentration limits, margins andother eligibility criteria, effecting substitutions as necessary and providing
collateral projections.
Focus on the Balance Sheet: Pledge agreements obtain better capitaltreatment, so our pledge transaction processing solution helps withbalance sheet management.

Structured
Notes

Market participants can also look to BNY Mellon for alternative financing solutions
such as structured notes. With structured notes, a bank/broker-dealer works with
us to issue the bonds/notes. The collateral that is being used to secure the notes
is then maintained on our collateral management platform. Banks/broker-dealers
can use structured notes to diversify their funding options and potentially accessa broader pool of cash providers who may not participate in the repo market today
but still require investment solutions when they are long cash.
Focus on the Balance Sheet: Structured notes are off-balance sheet funding
options which appeal to broker-dealers who are managing Basel III requirements.

“Regulation and its effects on the balance sheet
are causing banks and broker-dealers to review
their short-term liquidity options. BNY Mellon
helps them to issue structured note programmes
as a funding alternative.” — Gesa Benda“Our Korean pledge solution and our ability toallocate Japanese equities over record date are
two solutions developed in Asia that can help
our clients to efficiently mobilise and then best
optimise their collateral pool.” — Natalie Wallder

9 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONBNY Mellon Solution:

Strategies for Optimising Collateral and Finding Efficiencies
cont’dCrossBorder Useof Japanese
Government

BNY Mellon supports cross-border allocation of JGBs and the reuse of Japanese
Government Securities collateral for collateral receivers. These capabilities giveclients more financing opportunities using Japanese Government Securities.
Adapting our collateral management programme to accommodate JGBs helps
both buy-side participants and broker-dealers address market challenges. For
broker-dealers, JGBs are a liquid and inexpensive option to use as collateral.
For asset owners long in JGBs, the cross-border solution helps these securities
generate yield.

Collateral
Optimisation
Technology

BNY Mellon’s collateral optimisation technology has redefined collateral
optimisation for our collateral management clients by incorporating regulatory
requirements and bringing balance sheet relief. Our collateral optimisation
technology can help clients:––increase the amount of unallocated collateral in a client’s account; and––maximise the potential for successful collateral substitution.
The calculations within our optimisation engine aim to reduce
overcollateralisation and/or undercollateralisation. Clients also have accessto detailed reporting for a real-time view of positions and collateralisation
throughout the business day.
Focus on the Balance Sheet: BNY Mellon’s optimisation technology helps
clients manage Liquidity Coverage Ratio (LCR) balance sheet requirements.
During the collateral allocation process, the engine takes into account trade
duration, preserving HQLA for short-dated trades and, if possible, leaving HQLA
unallocated.

“The need for Japanese Government Bonds(JGBs) as collateral is increasing. BNY Mellon
has been accepting JGBs as collateral for
more than a decade, and our JGB solutions
are helping our clients with this recent trend.”— Toru Hanakawa“Our clients seek to reduce balance sheet costand maximise collateral value. To accomplish
this they must source, aggregate and optimise
collateral efficiently. BNY Mellon provides
the tools and infrastructure globally to movecollateral assets where they need to be, when
they need to be there.”— Drew Demko

10 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONThe Challenge:

Managing Initial Margin/Variation Margin Requirements
Global regulatory reform is reshaping and redefining the way institutions are required to post initialand variation margin, manage collateral and segregate assets. While the implementation dates for thechanges and new requirements vary, there will be a significant impact on market participants’ businessmodels. As the new initial margin requirements are implemented beginning September 2016, we areshaping solutions that maintain a high degree of automation while focusing on controls, risk mitigation,
efficiency and transparency.

BNY Mellon Solution:

Tools for Addressing New Margin Requirements
Bilateral Margin Segregation – Managing Your
Margin Positions While Reducing the Extent ofYour Counterparty Exposure
The posting and receiving of collateral is new tomany institutional investor firms. Issues with data
management (security ISINs reconciliations), cash
management and inventory management make“cash collateral” easier to use in current markets.
These issues need to be addressed before posting
non-cash collateral can be done efficiently.
We offer a margin segregation platform that delivers
custodial services in support of initial marginsegregation for both cash and non-cash collateral.
Using this platform helps clients with collateral
segregation by providing:––transparency and automation throughportal access;––electronic default notification functionality;––flexible reporting and formats;––integration with BNY Mellon cash investment
technology; and––electronic instruction capability including SWIFT.

Cash or Securities
Collateral:
IM Amount Wired

PledgorCash or Securities
Collateral:
Released by
Secured Party

Cash and Custody
Account

Security interest

SecuredParty

11 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONTri-Party Collateral Segregation –Segregating Pledged Collateral AcrossMultiple Counterparties Efficiently
For more than 30 years, investment banks andbroker-dealers have been using tri-party collateralmanagement for repo, securities lending and othercollateral management obligations. The tri-party
structure now also allows them to post and receive
margin on derivatives and structured trades andintegrate operational processes to increase thespeed and automation of moving collateral. With
the growing volume of collateral calls and collateraleligibility schedules that need to be managed, auto
allocation and asset optimisation are preferredwith the eligibility checking and optimal asset
allocation handled within a tri-party model.

Using the tri-party model, we can help with posting
initial margin/independent amounts to swap
counterparties. We can consolidate the securities
collateral allocation process across repos, OTC
derivatives, TBAs or any other instrument requiring
collateralisation. The initial margin/independent
amount, in the form of securities, is held in acollateral account at BNY Mellon while allocation
is efficiently managed through optimisation,
eligibility and sufficiency screening criteria.
Using this platform offers many benefits including:––transparency and automation throughportal access;––flexible reporting and formats;––streamlined collateral allocation process;––optimisation capability through customisable
rule set(s); and––collateral valuation.

2. BNY Mellon creates/modifies collateral amounts
per matching instructions (where available).

1. Collateral provider
sends collateral amounts
to BNY Mellon.

Collateral ReceiverCollateral Account

1. Collateral receiversends collateral amounts
to BNY Mellon.

Account 1

Collateral
ProviderCollateral
Receiver

Account 2
4. BNY Mellon provides
intra day and end of dayreporting on collateral
allocation.

Account 3
Account n

4. BNY Mellon provides
intra day and end of dayreporting on collateral
allocation.

3. Collateral allocationand optimisation occurs.

“As initial margin/variation margin requirements
come into play, financial institutions andinstitutional investors need to decide where they
are going to set up their operational capabilities
around margin processing. BNY Mellon can help
with sourcing, optimisation, financing, segregation
and administration enabling clients to focus on
their core portfolio needs.” — Sam Jacob“Foreign exchange transactions are going tobe subject to more margining and collateral
movement. BNY Mellon can help clients navigate
this new landscape and find foreign exchange
and collateral solutions to meet their needs.”— Melanie Wong

12 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONHOW TO BUILD A COLLATERAL SEGREGATIONSOLUTION
Margin segregation rules require solutions thatmaintain a high degree of automation while
focusing on controls, risk mitigation, efficiency andtransparency. As market participants reevaluate
their margin and collateral management practices,
they need to focus on solutions that can help
provide automation, security and clarity.
A Collateral Segregation Solution – What Should
It Include?
The right segregation solution will not come in one
size fits all. Key considerations for an effective
segregation solution include the following:
1. E
 nsuring the chosen and eligible asset choices
are posted to each counterparty
2. The level of assurance for the safe return ofassets in a timely and efficient manner in theevent of a counterparty default
3. The ability to move assets quickly/effectively
and, in certain cases, outside of market hours
4. The tools and channels to allow the proactive
management of the assets held within a“Segregation Network” – the different
segregated custody accounts required versus
each counterparty

5. I mpact of scale of solution on operations,infrastructure and reporting and data
management
6. C ost of solution
Choosing A Service Model – Full Or
Modular Approach?
BNY Mellon can offer a simple user interface
to move collateral into a segregated account.
This segregated account will hold the amount ofcollateral due to each counterparty as well as
the acceptable collateral types. We also provide
each counterparty with a process to facilitate thereturn of unneeded or excess collateral back to thecollateral provider.
For clients looking to use a service provider for
more elements of the collateral process, we canalso help:––maintain information on which types of collateralare eligible to each of the counterparties;––provide data to help you determine if there issufficient eligible collateral;––maintain automated parameters as to which
eligible collateral is most efficient to use to meet
obligations; and––systemically move the identified pieces of eligible
collateral to segregated accounts opened at
BNY Mellon.

Powering Each Business Model
BNY Mellon’s suite of collateral segregation tools, technology and solutions are designed to help market
participants to:
Find new efficiencies
in the utilisation of
non-standard collateraland long assets

Protect assets fromcounterparty default
and comply with risk
management
approaches andregulatory requirements

Gain transparency toview/manage your collateral
portfolio across BNY Mellon

Optimise collateralthrough modeling basedon best use andallocation of youreligible collateral

Reduce friction costs
and improve operational
efficiencies acrossmarket participants

BNY Mellon’s collateral segregation services combine the safety of segregated accounts with dynamic
system capabilities that help optimise collateral use while also facilitating the mitigation of counterparty,
market and operational risk.

13 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONCOLLATERAL ADMINISTRATION
It is important that collateral is efficiently posted
to cover exposures associated with derivatives,
repo, securities lending, forward-settlingmortgage-backed securities transactions, andany other type of bilateral exposure. BNY Mellon’s
collateral administration solution can help
clients manage the collateral for these bilaterally
traded transactions. We offer a range of margin
management tools to help monitor margin
parameters, calculate margin status and segregate
margin. This solution helps clients maximise
margin calls and minimise margin movements.
A third-party electronic messaging service,embedded into our system, facilitates the issuanceand response to calls allowing straight-throughprocessing (STP). This functionality supports theexchange of critical information on exposures andcommitments in a real-time and secure manner.
Our capabilities help support efficient marginmobilisation and risk mitigation througha hierarchy of activities covering:––data capture, including agreements
and positions;“Clients need to make sure that they areadequately collateralised at any point in the day,and they are seeing a higher level of engagementfrom their credit and risk departments. BNY
Mellon can help through our collateral valuation
and reporting capabilities.” — Brian Leddy“In Asia-Pacific, there’s the added complexity ofclients having different entities across various
jurisdictions. We work with clients to set up each
entity on our collateral management platform
so that it can take advantage of our collateraleligibility, auto allocation and asset optimisation
capabilities.” — Filippo Santilli––daily mark-to-market of collateral;––margin call processing;––application of security and cross-currency
haircuts;––substitution of eligible collateral;––assess eligibility of proposed collateral;––settlement;––transaction and exposure reporting; and––collateral safekeeping (where requested).

14 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONThe Future of Wholesale Funding Markets
A US Perspective

BRIAN RUANE

CEO of Broker-Dealer Services“Collateral is the new cash” – the ongoing shift away fromthe traditional uncollateralized world, particularly in thederivatives space, means that the demand for collateral andhigh quality liquid assets, and its mobility, is outpacing thedemand for all other asset types.
The creation, adoption, and operationalization ofregulations have dominated financial literature since the
Financial Crisis. The narrative around wholesale funding,repo and collateral management may move away fromthe pure macro effects of regulatory reform to include
firm specific strategies for implementation and the reemergence of market driven change. We believe that futurechanges in collateral management are more likely to be
driven by internal strategy and capital allocations than by
overt regulatory pressure.
The complex array of market priorities highlights theimportance of having a comprehensive roadmap to help
guide a firm’s collateral strategy. An increased focus on
an enterprise-wide view of collateral management andthe introduction of cleared repo products are expected to
be at the forefront of change, helping markets and clients
alleviate pressures from risk, regulation, and operationalburdens. The ability to mobilize collateral across legal
entities and countries is becoming as important today as
payment systems have been in the past.

We believe that our position as both the US’s largest triparty agent and holder of collateral4 gives us the uniqueperspective to understand the evolving market and toprovide global collateral management solutions. To highlight
this, we published a Thought Leadership paper titled “The
Future of Wholesale Funding” in which we concluded that:––US Tri-Party Reform materially improved the safety andsoundness of the financial system.
––The Federal Reserve Reverse Repo programs are importantto the market and their material involvement is expected toremain a near certainty for the foreseeable future.
––Expanding the availability of cleared repo or uniquecentral counterparty clearing house (CCP) structure isdesired by market participants and is the clearest pathto giving global systemically important banks (G-SIBs)
balance sheet relief.
Given the critical importance of wholesale funding inEurope and Asia-Pacific, the impact of US reforms will
inevitably ripple across other financial markets.

Download the full paper at www.bnymellon.com/wholesalefundingmarkets.

“Our collateral management solution for segregation
is a great example of where we can add value. Our
broker-dealer clients are already set up in our collateralmanagement programme and have the infrastructure inplace.” — Jeannine Lehman“Broker-dealers are interested in diversifying
their cash provider base and adding tenor to theirfunding portfolios. They can leverage our global
market presence to find a more diverse base of cash
providers.” — Ken McDonnell

15 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONSECTION 3 Case Studies

BNY Mellon is a pioneer in providing collateral solutions around the globe. Please read the following casestudies and discover how our collateral ideas, insight and vision can help you keep moving forward withthe markets, and along the way, help to improve the efficiency of your collateral management activities.

Case Study: Managing Balance Sheet Requirements by using Money Market Funds as Collateral
The Challenge: Regulatory change made hedge fund client cash too expensive for broker-dealers to hold.
The dealers still want access to hedge fund assets to help them finance transactions, but they want tomove the cash off balance sheet.
The Solution: BNY Mellon’s LiquidityDIRECT cash investment portal allows hedge funds to invest
their cash in money market funds, and these fund shares could then be used by broker-dealers tocollateralise transactions on BNY Mellon’s collateral management platform. LiquidityDIRECT provides
access to a broad array of funds with multi-currency options and robust reporting. Onboarding is astraightforward process with streamlined documentation requirements, minimal operational set-up andno new technology to install.
Benefit – The Bottom Line: BNY Mellon’s capabilities around money market funds and collateralfacilitate balance sheet optimisation.

Case Study: Consolidating and Automating Collateral Management for OTC Derivatives
The Challenge: A fund, which was an active user of OTC derivatives, had three asset managers.
Collateralisation for the derivatives trades was handled separately by each manager which resulted
in the fund having three sets of margin calls to reconcile, reduced cross-netting opportunities andincreased cross-settlement risks.
The Solution: Collateral administration for the fund’s OTC derivatives activity was consolidated at
BNY Mellon. We provided ISDA/CSA support, dispute management, collateral valuation, reporting
and the ability to customise the margin and collateral process via a web-based interactive workflow.
Benefit – The Bottom Line: The fund gained greater transparency and operational control as well as
simplified margin call reconciliation. In addition, the fund could better manage netting allowances which
helped reduce transaction charges and cross-settlement risks.
16 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATION

Case Study: Helping Hedge Funds Mitigate Counterparty Exposure
The Challenge: Prior to 2008, hedge funds posted collateral directly with their prime brokers, thus
concentrating a significant amount of cash and securities among a small group of counterparties.
After the market crash, counterparty exposure came under intense scrutiny by both the funds andtheir underlying investors, and hedge funds needed to find a new collateral model that would help
diversify their counterparty profile and mitigate risk.
The Solution: BNY Mellon’s bilateral margin segregation model was the solution. Placing collateral with
BNY Mellon helped the hedge fund diversify risk away from their prime brokers, gave them transparency
into their collateral assets and provided flexible options for investing cash collateral. This model was easily
replicated across each fund/dealer relationship and helped to satisfy underlying investors’ concerns aboutcounterparty risk.
Benefit – The Bottom Line: BNY Mellon’s bilateral margin segregation product helped hedge fundmanagers mitigate counterparty risk.

Case Study: Helping Clients Source HQLAThe Challenge: With LCR requirements and the expanding role of central clearing for transactions,
HQLA are in high demand. In addition, broker-dealers are increasingly interested in term financing
to aquire HQLA.
The Solution: Through BNY Mellon’s agency securities lending programme, we facilitate asset owners
lending HQLA (e.g., US Treasuries) against equity collateral provided by the borrower. Increasingly, these are
structured as evergreen transactions which help with the broker-dealers’ need for term financing. These
trades can also leverage BNY Mellon’s global presence and give borrowers and lenders flexibility outside of
the markets in which they principally trade. We work closely with clients and risk/credit personnel so thatthese transactions fall within the participants’ securities lending programme parameters.
Benefit – The Bottom Line: Broker-dealers have the potential to optimise their collateral assets globallyto help source the HQLA they need. Asset owners have the opportunity to generate incremental revenue
from lending HQLA.

“In Europe we are seeing more buy-side clientscoming to the table as investors just at the time
when the sell side is reviewing their business modeldue to regulatory pressure. Other clients, driven
by yield, are looking to manage their collateralmore efficiently. As these trends develop, we’reoffering solutions such as money market funds as
collateral.” — Ingrid Garin“Asset managers look to us to provide
expertise on managing their daily marginneeds. BNY Mellon’s solutions allow
our clients to devote more resources
toward driving performance, new productdevelopment and distribution.”— Matthew Joyce

17 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATION

Consultant’s Corner –SECTION 4
APAC, EMEA and US
Consultants are also speaking to their clients about collateral. Thomas Ciulla (TC), PricewaterhouseCoopers,
New York, Nick Nicholls (NN), Business Consulting Lead, GFT, UK, and Kishore Ramakrishnan (KR),PricewaterhouseCoopers, Hong Kong, describe the trends they are seeing around collateral management
and collateral segregation.

Q. What kind of engagements are you usuallycalled in for related to collateral management
and segregation?
NN – Our clients are predominantly broker-dealersand European investment banks. With the larger
broker-dealers, the focus is optimisation and meeting
regulatory compliance while some of our tier 1 bankclients are looking to move to an enterprise-wide
collateral strategy to manage both counterparty
credit and funding. We also work with clients as they
review their current collateral management process.
These clients may have governance issues or process
gaps and are often looking to develop a best practise
within their organisation.
Clearly, buy-side institutions are impacted bywhatever constraints the banks have to endure.
Our focus with those clients at the moment is
explaining or reinforcing the potential impact ofregulatory reform on their business
TC – PwC has had a dedicated collateralmanagement and liquidity practice for over a
decade and in short, we do everything but security
perfection. Across the sell side, buy side, andcustody banks, we are helping clients in a varietyof areas. For some, we are developing strategies
to meet the impending bilateral margining rules,

but we are also breaking down cross-product silos(OTC derivatives, repo, SBL) to achieve liquidity
and operational efficiency. Improving efficiency,
while meeting regulatory mandates, is particularly
important with sell-side clients who are invariably
under pressure to reduce costs (often throughshared services and utilisation).
We also work closely with buy-side clients. For
many of these clients, “repapering” ISDA CSAs
is a priority. For others, who have not exchanged
margin through automation as mandated byregulators, we are helping them move from spread
sheets to either vendor packages or outsourced
solutions (very often from service providers suchas BNY Mellon).
KR – Additionally in Asia, each of the market
participants have a different set of challenges
and priorities as they look through the lens of“asset protection/asset safety” and “operational
efficiency” when addressing “segregation”
mandates. PwC assists these firms in
implementing the segregation rules that involve
establishing custodian accounts by connecting tocustodians alongside negotiating tri-party control
agreements and account control agreements.

18 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATION

Q. In your conversations with the street, what
are the top concerns regarding collateralmanagement and how do you see firms
dealing with it?
KR – When I speak to clients in Asia-Pacific,
they are concerned with assessing the impact
of collateral/margin requirements from acapital/balance sheet standpoint. Firms areworking towards identifying the least common
denominator in the intersection of Basel capitalrules, leverage rules, funding rules and their
bearing on the firm’s collateral/margin imperatives.
Firms are also equally concerned about dealing
with operational challenges as they pertain
to cross-border transactions due to divergent
approaches to collateral regulations in each region.
TC – Adding to Kishore’s points, clients in the
US are gathering momentum for the September
1 deadline while others are preparing for the
March 2017 mandatory variation margin (VM)
requirements. Many participants exchange VM
regularly, so preparing for the regulations entails
developing an approach to handle increased
margin call volumes. Correspondingly, many
participants are developing regulatory compliant
documentation that is driving the increasein margin calls. This is a significant issue asorganisations can have as many as four CSAs active
for any given portfolio (legacy VM, regulatory VM,
legacy IM, regulatory IM). However, organisations
must first understand the P/L impact of migrating
legacy agreements to regulatory compliant ones
against the operational burden of managing
multiple CSAs per margin event.
Q. We often hear the term “sources and uses” ofcollateral. What are these in reality and what
collateral do you see as most in demand?
NN – In effect, sources and uses of collateral aresources and uses of funding, and there should befunds transfer pricing – or equitable distributionof benefit or cost - back to the trading books
for that use of liquidity. Utilising firm inventory
effectively and sourcing cheaper forms of eligible
collateral from the market are part of an effective
collateral management process. In terms of
demand, cash and high quality government
debt will always be popular forms of collateral.
Regulators have allowed some leniency in thedefinition of HQLA under LCR, but then that
defeats the object of what quality collateralshould be, and assets such as equity or RMBS
remain quite restricted.

TC – HQLA is certainly in demand. Not only is it thecollateral of choice to meet regulatory coverage
ratios, but it is also a critical component of therepo market. But this question really points tocollateral optimisation. This is only one formof optimisation that needs to be consideredalong with many others that include pre-tradeand funds/collateral transfer optimisation. It is
critical to understand how to best source and use
collateral across the organisation – being able toview the entire collateral inventory, understanding
what is encumbered, understanding each function’s
need (lending, margin calls, treasury, regulatory)
and developing the operating model and fundingtransfer mechanisms to share and use collateral
most efficiency.
Q. Where do you see collateral demand/supply
going? Is a collateral squeeze expected?
TC – This has been discussed for years and has
not seemed to materialise yet. Still, more collateralwill be needed to cover an increased volume ofbi-lateral margin calls, combined with what isneeded for clearing, as well as what is needed tosatisfy capital requirements. At the same time,
there are participants who do have cash and othereligible collateral. They can become more active
securities financing transactions (SFT) participants
if the incentive is right. So, if beneficial owners
can be convinced to participate more in securities
lending markets, while at the same time new repo
solutions, such as direct participant clearing
solutions for the buy-side, come to fruition,
collateral shortages might be mitigated.
NN – There is a potential for a shortage of eligible
HQLA as demand rises and supply shrinks. QE
has been ongoing in major economies since 2009.
With the exception of the US this continues.
Government debt crises of 2011 saw these asset
types downgraded, meaning in some cases, thoseassets were no longer eligible for collateral. Other
governments have reduced or withdrawn fromdebt markets altogether, and while the supply iscompromised, demand continues to increase. Banks
are required to hold reserves of HQLA to support
their liquidity ratios, and ensure that they can settle
cash and securities in a crisis. Gross margining
for IM will see even more of these eligible assets“locked away” and unavailable to the market.
KR – I actually do not subscribe to the view ofperceived collateral squeeze or cliff. The challenge
at the moment particularly within Asia is to beable to find an asset that meets the criteria of both
“high quality” and “high liquid”. I expect to see an

19 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATION

expansion in the universe of assets that can fit thedefinition of “eligible collateral” in the months andyears to come within APAC.
Q. Based on your experience, do you see businessmoving towards enterprise-wide collateralmanagement or is it still a divided approachwith silos?
NN – I think it varies by client type. The larger andmore adept hedge funds will look for effective andefficient management of assets and collateraland will optimise their positions. I see pension
funds begrudgingly being pulled in to mandatory
clearing. One would hope that our pension funds
are extremely conservative in the way they
operate, but they and other funds may be sitting
on assets which, if unlocked into the market, could
solve some of their funding issues and help (in the
UK at least) to reduce some of the defined benefit
shortfalls they’re now incurring on suppressedmarkets and low yielding assets.
Silos also exist within banks and need to bebroken down. If that doesn’t happen, then banks
will never efficiently manage their inventory or
their collateral. I’m being very direct here but withreason. If we don’t work within organisations andacross the industry to manage our pools of assets
more effectively, there may well be a time whencollateral costs make derivative hedges unviable.
TC – There are certainly common issues andapproaches to solve those issues among the
buy and sell side. This includes calculating IM,
resolving disputes, and mobilising and settlingcollateral. At the same time, there are manydifferences, in part because the buy side is sodiversified. As such, a large asset manager mightvery much look like a sell-side organisation interms of operations, technology, and crossenterprise collateral management solutions (i.e.,
breaking down the silos). Smaller organisations
might be less concerned about silos and links
to other internal functions such as treasury
because they are smaller and flatter and have acorrespondingly smaller need for cross-productsolutions, often times relying on their outsource
partner to handle the bulk of their collateralmanagement needs.
KR – Traditionally within banks, asset managers
or insurers, each desk was the master of its own
asset inventory, causing “trapped asset inventory /liquidity pools.” This model is no longer sustainable,

and I believe that the industry is moving towards acentralised collateral management architecture. In
doing so, the treasury functions have taken center
stage in partnership with their markets businessand collateral functions in developing a for-profit
centralised collateral utility to achieve capital andoperational efficiency. Treasury is more involved
because they act as the gatekeepers of capital andare primarily responsible for the optimising theassets on the balance sheet.
Q. Would you estimate more collateral baskets
being traded in the future, given how CCPs andother regulated forms prescribe the range andbalance of collateral required?
KR – With increased restrictions on re-use ofcollateral assets and lack of HQLA within Asia
including in both cleared and un-cleared world, I
certainly foresee the rise of collateral baskets andcollateral swap type products in the near future.
Additionally, I am noticing CCPs offering crossproduct margining to the clearing members andpassing on the capital savings to their clients. Thisis a particularly important offering given the lack of
netting enforceability in many markets across APAC.
NN – I think this has some merit. ETFs could bean answer in terms of providing a meaningfuland (relatively) similar level of security as HQLA.
Working them into an eligibility schedule would
also reduce some of the collateral cliff issues wementioned earlier. Some may disagree with thisbut, if we gave the accountant the ability to “lookthrough” to the underlying fund components, there
should be no reason why these couldn’t be aneligible instrument.
Q. And what about cash, is that still king?
TC - Cash is still king for OTC derivatives
margining. However, that will likely change. Cashhas segregation issues, is operationally more
complex (e.g., interest processing), and is also
not usually optimal for initial margin. When there
is a change in the negative/low interest rateenvironment, cash might also be in less demand
to meet collateral calls. As collateral is managed
more centrally, firms will seek to unlock latentliquidity through greater access to non-cash
assets. Finally, those who are not natural holdersof cash (e.g., insurance companies in liability
driven investing (LDI) strategies) will look to post
non-cash collateral instead of transforming those
into assets into cash (or holding cash).

20 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONNN – There may be distinct on-balance sheet
netting advantages for using cash collateral, and
80% of the market uses cash to cover variation
margin. So, yes, it probably will continue to be king.
But with cash not really suitable for initial margin,
and given that the return on cash at CCPs and CSs
isn’t floored at 0%, it’s far from optimal. It is all
but impossible to segregate cash safely. For initial
margin and pledge agreement variation margin,securities are the best option.
KR – Building on Tom’s points regarding transition
from cash to non-cash, cash on the balance
sheet drives a higher leverage ratio. A number offinancial institutions have tried to move assets
off their balance sheet using different accounting
treatments in an attempt to reduce their leverage
ratio and subsequently the amount of capital
they are required to hold. Financial institutions
are working with the regulators to put forth anargument that some of the assets on their balance
sheets were held on clients’ behalf and so should
not be treated as a liability and that those assets
should go into a separate, segregated account.
Q. In what ways do you think clients could help
themselves when it comes to managing collateralacross the market?
KR – Clients can certainly help themselves byembracing the industry’s tri-party solution offerings.
NN – I also see tri-party as an effective way of
meeting the demands for increased capacity
invoked by regulation. Effective outsourcing ofcollateral settlement and substitution process
to the tri-party provider reduces risks, createscapacity, and should reduce RWA against
counterparty credit.

Q. If you had to come up with the top threecollateral management and segregation initiatives
for clients for 2016-17, what would they be?
TC – I’ll focus on collateral segregation, and I
would ask clients to consider the following.
––their plans and workflow for using a tri-party
model for collateral segregation––their plans and workflow for using a third party
model and developing the necessary collateral
optimisation strategy for this model––the funding of these new requirements giventhat assets are rendered effectively immobile
due to segregation
NN – I would ask clients to work on the following
three key areas:––creating capacity and inventory availability––improving reporting on all potential risks––reducing exposure and fails risk
KR – Like Tom, collateral segregation would be thetopic of conversation.
––Is there full clarity around collateral segregation
requirements given that some regulators havenot published explicit guidance, particularly in
the Asia Pacific region?
––Clients should focus on achieving capital andoperational efficiency in adopting or providing
segregation solutions for asset protection andasset safety.
––I would also ask clients about the tri-party model
for collateral segregation. I expect to see a rise in
the adoption of tri-party offerings across APAC
as it is a time-tested solution.

TC – I agree. Both sides of the street will lookto tri-party collateral segregation solutions
driven by regulation, safety, and efficiency. The
largest sell-side/buy-side participants aside,most participants either need to find a collateralmanagement vendor package that is compliant
with the new margining rules or upgrade to newer,
compliant application versions

21 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONSECTION 5 Conclusion
BHAVNA HASWANI

Senior Product Manager
Collateral Management
BNY Mellon Markets
We believe the collateral management industry
is at the cusp of change that will have asignificant impact across market participantsi.e., sell side, buy side, custodians and clearing
members. The complexity continues to growwith multiple regulatory changes and thevarying approaches to meet the demands of
local regulatory bodies. Consequently, market
participants will need to evolve and create
exposures to asset classes through new
structures and broaden access to collateral
asset types. A key theme thus far addressedin this document has been risk mitigation
through collateral segregation as required byinitial and variation margin requirements. We
recognise the ability to strategically apply theappropriate technology solution coupled withthe right operational set up to meet collateraldemands and margining requirements will be
critical in this new landscape.

MARK HIGGINS

Senior Business Development
Manager, EMEA
BNY Mellon Markets

ARE YOU READY?
1. A
 re you able to identify when/where
your collateral is held and if it is held insegregated accounts?
2.Are you ready for the operational challenges
of managing more collateral that will beallocated across more transaction types?
3. C an you unlock collateral mobility with aconsolidated view of your collateral assets
across your business and procedures forprioritising the use of idle assets?
4. D
 o you have adequate tools and channels to
proactively manage the assets held withinyour “segregation network” i.e., the different
segregated accounts required for each ofyour legal counterparties?

BNY Mellon is well positioned to play a leading role in assisting clients to mobilise and optimise collateraland help to mitigate collateral silos whilst they seek to maintain and grow their business.
We hope that you have enjoyed reading this paper, recognising some of the challenges faced withcollateral management post regulatory reform. We have a broad range of people, business experienceand technical capability at BNY Mellon, all ready to help you develop your business and work with you
to deliver the very best in collateral management. You have met some of our team through reading thispaper, and now we welcome you to meet us in person. To help with that, please refer to our details at theend of Section 6, and feel free to give us a call or drop a line.

22 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONMarket Leading Solutions…A Unique Provider… BNY Mellon
What are the driving forces behind these collateral management and segregation solutions?
COMMITMENT
Collateral management and segregation are coreservices for BNY Mellon, and we continually invest
in the people, processes and technology that
support our solutions.

GLOBAL REACH
We help clients successfully manage and mobilise
their assets into eligible collateral. Our teams
located in APAC, EMEA and the US work with you todeliver integrated solutions across geographies.

BREADTH OF SERVICES
The size and scope of BNY Mellon’s offering
provides clients with the infrastructure andexpertise they need to address regulation
requirements and changing market dynamics.
Our suite of services helps clients focus on theircompetencies and sustain, and further expand,their trading and investment strategies.

INNOVATION
For over two centuries, BNY Mellon has introduced
new products and services that have helped
our clients succeed and transform the financial
services industry worldwide. Our global Innovation
Centers develop breakthrough financial services
technologies and encourage the collaboration that
results in cutting-edge solutions.

FINANCIAL STRENGTH
Supporting all that we do are credit ratings thatare among the highest in the financial services
industry. BNY Mellon has consistently received highratings from all four major credit rating agencies
and for key credit categories.5

These driving forces support our efforts to build
collateral management and segregation solutions
that can help drive your success in markets aroundthe world.

“Clients need service providers that can adapt
in a rapidly changing environment. Due to BNY
Mellon’s scale and deep liquidity, we have beenable to develop products and services to help ourclients.” — Rebecca Lentchner“Collateral receivers are looking for standby liquidity
agents, and BNY Mellon is uniquely positioned tofill this role through our collateral pricing expertise
combined with our capital markets execution
capabilities.6 When looking for a liquidity agent,collateral receivers need to consider which providers
are better placed to weather a market downturn, andBNY Mellon’s strong capital and liquidity positions
make us a leading choice. ” — Jeremy Colvin

23 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONSECTION 6 Contributors
Authors
Staffan Ahlner
Head of Collateral Management Product
BNY Mellon Markets
Staffan is responsible for the strategic direction and product development for BNY Mellon’s collateralmanagement services.
Dominick Falco
Head of Collateral Segregation Product
BNY Mellon Markets
Dominick leads the team responsible for developing BNY Mellon’s collateral segregation product suite.
Mark Higgins
Senior Business Development Manager, EMEA
BNY Mellon Markets
Mark is part of a team leading the promotion of collateral management solutions available at BNY Mellon.
Bhavna Haswani
Senior Product Manager, Collateral Management
BNY Mellon Markets
Based in Hong Kong, Bhavna is part of a team driving BNY Mellon’s Asia collateral suite of solutions anddeveloping regional and global product strategies.

Thank you to the following individuals for contributing to this paper.
BNY Mellon
Gesa Benda
Jeremy Colvin
Drew Demko
Ingrid Garin
Jason Garwood
Toru Hanakawa

Sam Jacob
Matthew Joyce
Joseph Keenan
Bill Kelly
Brian Leddy
Jeannine Lehman

Rebecca Lentchner
James Malgieri
Ken McDonnell
Kevin Ronan
Brian Ruane
Filippo Santilli

John Templeton
Natalie WallderPeter Wijns
Melanie Wong

24 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONGFT UK

Nick Nicholls
Business Consulting Lead
Nick brings over thirty years of experience in investment banking and capital markets, working in prominent roles across front,
middle and back office functions. Prior to joining GFT, Nick was with Credit Suisse where he worked in liquidity management,
collateral optimisation and business reengineering roles. Nick has also been instrumental in creating Target Operating Models
for Tier 1 banks and consulting banks with their migration and entity rationalisation programmes. Specialising in businessarchitecture and process reengineering, he has extensive experience of creating processes that incorporate efficiencies within
workflows that enhance profitability, whilst also assisting clients with their regulatory obligations. Nick is a chartered memberof CISI.
GFT is a listed business advisory, technology consulting and implementation provider with over 4,000 staff in 13 countries,
across Europe and the Americas region. GFT’s specialist focus in capital markets was reinforced by the acquisition ofRule Financial in 2014. Its client base ranges from the largest internationally active banks and asset managers to smaller
domestic financial services providers. GFT differentiates by working alongside clients to implement change.

PricewaterhouseCoopers
Thomas Ciulla
Advisory Principal PwC US

Thomas is a principal in Banking and Capital Markets focusing on derivatives, collateral management and trade clearing.
He assists both buy and sell-side capital markets participants realise their collateral management and clearing strategies
across products that include derivatives, swaps, repurchase agreements, and securities lending / finance.
Thomas has over 20 years’ experience in developing strategy, business, technology, and architectural solutions for buy-side,sell-side, custody bank and utility market participants. He has deep experience in evaluating, selecting and implementing
many of the leading collateral management solutions to support leading practice operating models.
He has led many large business/IT transformation projects for global financial services participants, including working withconsortiums to develop common industry utility solutions, industry participants who have formed joint ventures, mortgage
lenders under regulatory scrutiny, as well as several multi-year anti-money laundering efforts that addressed data,systems, and policy issues.
In addition to leading capital markets and anti-money laundering efforts, Thomas has provided other financial services indomains as diverse as trade surveillance and best-execution initiatives.
Thomas attended Columbia University and John Jay College in New York. He is also a certified Project Management
Professional (PMP), Certified Fraud Examiner (ACFE Certified Fraud Examiner) and a Certified ACAMS Anti-Money
Laundering Specialist.
Kishore Ramakrishnan
Director PwC Hong Kong
Kishore is a Director in the Financial Services Risk & Regulatory Consulting practice of PwC Hong Kong, and he brings over
15 years of industry and consulting experience in joining PwC. Prior to joining PwC, he has lived and worked in the US, UK,
Europe, Hong Kong, Singapore, Japan and India. In his most recent role prior to joining PwC, Kishore built and developed thecapital markets consulting business at EY focusing on global and regional financial regulations including derivative reforms,
bi-lateral margin reforms, Volcker regulations, capital reforms among other things. He has advised several top-tier sell-side
and buy-side institutions on the “structural” and “operational” implications of financial regulations. Kishore is quite activewith various industry working groups such as ISDA and ASIFMA. He also regularly interacts with various regional and global
regulators including IOSCO, IMF and ADB.
PwC is a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality inassurance, advisory and tax services. In relation to collateral management, PwC provides a range of services to its clientscovering sell-side, buy-side, custody banks, industry utilities, trade associations, regulators around collateral and margin
imperatives including but not limited to helping clients to: target operating model design & implementation; collateral
segregation implementation; technology selection implementation; vendor and service provider tracking; agreement /documentation management solution; margin model validation & approval services; margin reforms execution roadmap;
industry benchmarking of operating model; industry utility integration and testing services; F2B collateral process controls
gap assessment & remediation. The content PwC disclosed in the interview process is for general information purposes
only, and should not be used as a substitute for consultation with professional advisors.

25 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATIONTo learn more about how BNY Mellon can help you navigate the changing market,
please contact:
Drew Demko
andrew.demko@bnymellon.com+1 212 815 4450
Mark Higgins
mark.higgins@bnymellon.com+44 20 7163 3456
Filippo Santilli
filippo.santilli@bnymellon.com+852 2840 6664
JAPAN ONLY
The Bank of New York Mellon Securities Company Japan Ltd.
Hiroshi Ohno
hiroshi.ohno1@bnymellon.com+81 3 6756 4320
For further information on “The Future of Wholesale Funding” please contact:
Christine Cetrulo
christine.cetrulo@bnymellon.com+1 973 569 2357

ABOUT BNY MELLONBNY Mellon is invested in collateral management and collateral segregation solutions. We add
value for collateral providers and collateral receivers by providing connectivity, asset pools andeffective models to support our clients’ business needs. We offer services tailored to the underlying
business requirements of broker-dealers, financial institutions and institutional investors.
BNY Mellon is a global investments company dedicated to helping its clients manage and service
their financial assets throughout the investment lifecycle. Whether providing financial services
for institutions, corporations or individual investors, BNY Mellon delivers informed investment
management and investment services in 35 countries and more than 100 markets. As of March 31,
2016, BNY Mellon had $29.1 trillion in assets under custody and/or administration, and $1.6 trillion
in assets under management. BNY Mellon is the corporate brand of The Bank of New York Mellon
Corporation (NYSE: BK). Additional information is available on www.bnymellon.com.

26 | COLLATERAL SOLUTIONS FOR A CHANGING MARKET: COLLATERAL MANAGEMENT AND COLLATERAL SEGREGATION

1. The services described in the “Money Market Funds” section are not being offered and not available in Japan currently.
2. O ffshore Renminbi cash for the purposes of repo transactions can only be settled through cash accounts held in Hong
Kong.
3. R
 egistration of the Security Agreement in Hong Kong and other jurisdictions may be required. Your Relationship Manager willadvise whether this is necessary.
4. Source: The Bank of New York Mellon Corporation, Form 10-Q, for the quarterly period ended March 31, 2016.
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investorrelations/creditratings.html.
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07/2016 GLOBAL