A practical challenge for collateral optimisation

The big banks have looked to more closely integrate their collateral teams with trading desks to ensure they are posting the cheapest-to-deliver collateral on over-the-counter derivatives trades. But how practical is it for firms to always deliver the most efficient collateral? By Michael Watt

Christophe Coutte

Trading desks have historically not had the closest of relationships with their colleagues in the back office. Put any derivatives trader together with someone who works in the operations department at the same bank, and the chances are they wouldn’t recognise each other. That’s not really surprising. Each tends to function in his or her own sphere – the trader would trade, the person in the back office would settle and deal with any exchange of collateral. That is changing, though.

Many of the