Leading with Resiliency

Investment Operations Observations Blog Series, Part 2

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Leading with Resiliency

Investment Operations Observations Blog Series, Part 2

June 2020

by Terri Messina

Unpredictability is the new normal, as coronavirus infection rates, community reopening plans, and business forecasts seem to change from minute to minute. Asset managers are changing their investment strategies to meet volatile market conditions. They are also challenged to keep up with changing client demands, driving investment in new products/markets, and trading unexpectedly high volumes.

300% increase in use of complex derivatives

The increased use of complex derivatives and growing demand for intraday data have only raised the stakes. But few asset managers have the technological capabilities to quickly pivot their operation in a time of crisis. The recent pandemic highlighted the value of such capability when market volatility drove unprecedented trading volumes, unprecedented derivative usage, investment in expanded markets, and almost immediate new account setup to meet the changing asset allocation of end clients.


BNY Mellon Investment Operations is supporting our clients by helping to reduce the operational risks of investment operations through an automated infrastructure, a global operation with the ability to pass the book, and deep and broad experience in asset management operations. The investments we’ve made in our infrastructure and our people are proving their value during these challenging times.


The Benefits of an Outsourced Solution


Today’s unprecedented needs have cast a light on legacy operations, tools and software. The value of outsourcing to a trusted provider has never been clearer. BNY Mellon’s new Investment Operations helps to efficiently consolidate data from various sources, can improve integration, and helps enhance data management and control capabilities.


The platform offers the flexibility to choose one or more modular services, including trade support, derivatives and collateral, bank loans, investment book of record (IBOR), and investment performance. Or clients can use our comprehensive suite of integrated capabilities to help achieve a front-to-back solution.


A Reliable and Resilient Platform


We offer asset managers the platform infrastructure and bedrock integration to help them rapidly close their technology deficits, bridge the gaps between trading and processing, and increase scale regardless of how regulatory or client demands evolve.


As industry pressures increase, our clients benefit from BNY Mellon’s:


  • Culture of innovation: We must continuously evolve so that we can support our clients. The challenge is to drive innovation while delivering on all the day-to-day tasks that keep our businesses running. We are able to balance an immense volume of transactions while transforming our business – and that of our clients.
  • 360-degree view of the industry: We are fully engaged with our sub-custodians, regulators, industry bodies, tax authorities, and key market infrastructure participants. This allows us to stay up-to-date with local market developments and share best practices to help keep our clients ahead of the curve.
  • Commitment to excellence: From an operational standpoint, our control structure and processes remain a top priority. Excellent delivery across the Investment Operations landscape relies on collaboration between our operations and services teams, coupled with high straight through processing rates.


Solution Spotlight


Derivatives and Collateral Services provides accurate and timely processing of derivative contracts. We provide tools to help our clients comply with their regulatory requirements and market conventions regarding these complex products. Our margin management process aims to validate and efficiently post collateral to cover the exposures associated with exchange traded derivatives, OTC derivatives, repo/reverse repo transactions and Mortgage backed Securities (MBS). We focus on seeing that collateral positions agree to counterparties and are segregated.


BNY Mellon’s technologies leverage commonly used market utilities to deliver the full lifecycle of services. Our integrated derivatives and collateral platform offers:


  • Flexible, electronic trade capture that easily integrates multiple data formats
  • Maintenance of a derivatives sub ledger complete with full lifecycle management to independently maintain derivative positions
  • Calculation and validation of initial and daily variation margin, with subsequent payment and custodial instruction
  • Segregation of collateral if/as required
  • Reconciliation of all collateral balances
  • Innovative APIs that enable easier access to capabilities
  • Full lifecycle management with independent monitoring, calculating, and processing
  • Margin management tools, including collateral posting, settlement, dispute resolution, and escalations


Client Benefits:

  • Helps reduce technology expenditures needed to keep up with ever-changing derivatives and collateral requirements.
  • Helps facilitate maximizing margin calls and minimize margin movements while reducing operational risk; tools to assist with compliance with regulatory requirements.
  • Enhances efficiencies with independent verification and reconciliation of valuations, margin requirements and lifecycle events.


The Result


In recent weeks, margin movements have increased fivefold and are normalizing at twice historical levels. Despite the challenges, we have helped our clients validate and meet margin calls as the value of the deliverable securities fluctuated in response to market conditions.


Investment Operations Support Can Help you Achieve your Strategic Goals


As the burden on asset managers grow, so has the need to expand the team. BNY Mellon’s outsourced solutions can help accelerate your expansion into new products, asset types, trading strategies, and markets.

“Implementing the consolidated outsourcing model with BNY Mellon has helped significantly with our business continuity during the COVID-19 crisis, ensuring we have been able to maintain high quality service for our clients. Our continued success and growth will be aided by efficient, dependable and flexible operations. We look forward to continuing to work with the BNY Mellon team in the future.”

— Vinay Abrol, Chief Operating Officer and Chief Financial Officer, Liontrust Asset Management Plc

Terri Messina

Managing Director, Investment Operations

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