Collateral Management

CHAPTER 11Securities Lending & Borrowing and Collateral – The SL&B Trade Lifecycle

This chapter illustrates the day-by-day and step-by-step activities necessary to successfully process an SL&B trade, by use of cash collateral. Both pre- and post-trade execution actions are covered, including the application of margin, exposure calculation, margin calls, settlement of margin calls and settlement of cash rebate.

Note #1: The contents of this chapter relate directly to the concepts described within the prior chapter, namely Chapter 10 ‘Securities Lending & Borrowing and Collateral – Principles of SL&B’; it is strongly recommended that readers firstly familiarise themselves with that chapter, so as to be able to successfully follow each step within this chapter.

Note #2: A variety of methods exist by which SL&B trades can be executed. However, to enable readers’ understanding of fundamental principles, in this chapter the trade characteristics and market practices are intentionally described from a generic (bilateral) perspective. A number of SL&B trade execution methods are described within Chapter 12 ‘Securities Lending & Borrowing and Collateral – Accessing the SL&B Marketplace’.

11.1 PRE- TRADING

 

The actions that should be performed prior to trade execution are: