Accelerating collateral mobility

Reduction in intraday liquidity requirements

Scalable for future digitised assets

Reduction in fails

Regulatory transparency and risk compression post-default

Reduction in intraday credit exposures

Inter-operability across custodians

Transfer of ownership/pledge at precise times during the day

HQLAᵡ is an innovative financial technology firm founded by financial market practitioners. Our vision is to accelerate the financial ecosystem’s transition towards frictionless ownership transfers of assets, and our core clients are financial institutions active in securities lending and collateral management.

Our immediate goal is to improve collateral mobility amongst market-leading triparty agents and custodians. Together with Deutsche Börse, we created a multi-layer operating model which enables our clients to exchange ownership of baskets of securities across disparate collateral pools at precise moments in time.

The atomic nature of our Delivery vs Delivery (DvD) ownership transfers provides our clients with capital cost savings by reducing credit risk, intraday liquidity requirements, and operational risk.

Use-Cases

LCR Management

Collateral upgrade transactions, evergreen / extendible maturities

Intraday Liquidity Management

Transfer of ownership of baskets of securities intraday DvD

Margin Pledge

Pledge baskets of securities real-time

Funding

Mobilise hard-to-move assets

Benefits

Transfer of ownership/pledge at precise times during the day

Regulatory transparency and risk compression post-default

Reduction in intraday liquidity requirements

Reduction in intraday credit exposures

Scalable for future digitised assets

Inter-operability across custodians

Reduction in fails

HQLAᵡ enables market participants to transfer ownership of securities seamlessly across disparate collateral pools at precise moments in time. This allows our clients to optimize their liquidity management and collateral management activities, thereby generating operational efficiency gains and capital cost savings.

Today

The current collateral upgrade market relies on collateral to be managed across a fragmented custody network.
Settlement of transactions occurs at unspecified times during settlement windows
Current market practice is to settle collateral upgrade transactions either by:
• Two Free of Payment (FoP) deliveries, or
• Two Delivery versus Payment (DvP) settlements
Both settlement practices consume costly bank capital. The former consumes intraday credit due to timing and mismatches of unsynchronised (FoP) deliveries, and the latter consumes intraday liquidity due to the cash payment legs of (DvP) settlements.

Tomorrow

HQLAᵡ uses new technology in an innovative way to enhance collateral mobility across the existing custodian/triparty landscape.
The HQLAᵡ operating model leverages distributed ledger technology to enable atomic Delivery verses Delivery (DvD) for baskets of securities residing at multiple custodians.
DvD reduces consumption of intraday credit and intraday liquidity, thereby providing capital savings.
Not only a date but also a time is specified for the start leg and end leg of a transaction.
HQLAᵡ could ultimately be used to enhance regulatory transparency over collateral chains, and potentially facilitate risk compression solutions for post default scenarios.
Initial roll-out in Europe, longer term strategy is to expand to APAC and US.

Latest news

Securities Finance Times Technology Annual 2021

April 21, 2021

Guido Stroemer outlines in The Securities Finance Times Technology Annual 2021, how HQLAᵡ plans to expand its product scope and functionality, while further extending connectivity to triparty agents, custodians and market participants (p. 22).

Use of distributed ledger technology in post-trade processes

April 12, 2021

HQLAᵡ referenced in the recent ECB AMI-SeCo report on European stakeholders’ use of distributed ledger technology (DLT) in securities post-trade processes.

Securities finance: Securities lending industry defines its digital future

April 8, 2021

Hampered by a lack of standardisation, the securities finance market is now undergoing a technological transformation that aims to reduce fragmentation, lower risks and increase revenues for many actors, finds Bob Currie.