Collateral markets in need of rewiring

New data suggests a tech upgrade is needed to avoid a large central bank footprint in markets

Collateral-rewire montage

Collateral velocity fell in 2022 for the second year in a row, despite healthy levels of eligible securities available for re-use. The trend likely reflects balance sheet constraints at global investment banks and the growing footprint of central banks in markets. It also bolsters the case for upgrading the plumbing of the markets with new technology to improve collateral efficiency.

For the uninitiated, collateral velocity describes the re-use rate of securities in collateral chains. It is

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