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HQLA x
The HQLAx story is enough to light the entrepreneurial fires in even the most long-serving company lifers . After spending 18 years working in securities lending and financing positions at UBS , Guido Stroemer added his name to history ’ s list of opportunistic entrepreneurs with a new initiative aimed at revolutionising collateral mobilisation . Aptly-named HQLA x , the project was one he could not have undertaken if not for his years of experience in the securities finance business . Essentially the idea is to create digital collateral records which represent an ownership stake in baskets of securities which are easily transferable between custody accounts without the physical movements of assets . The concept has taken off to the point where HQLA x has become one of the first names that comes to mind when many securities services executives are asked to highlight innovation in the industry . And in a relatively short period of time , you just have to look at the client list and investors ( BNY Mellon , Goldman Sachs , JP Morgan , Citi … to name a few ) to see how HQLA x has resonated with the industry . “ Collateral management is slow and clunky , delays in operational processes and settlement fails have resulted in operating , regulatory and opportunity costs for firms ,” the company explains . “ HQLA x was created to solve some of the biggest pain points in securities lending including intraday liquidity requirements , intraday credit exposures , and interoperability between tri-party agents .” Conventional market practice has been
ELEVATOR PITCH
Our mission is to improve collateral mobility amongst market-leading tri-party agents and custodians , which serves to achieve capital cost savings for our clients .
to settle collateral upgrade transactions by either Two Free of Payment deliveries or Two Delivery versus Payment settlements . Both settlement practices consume costly bank capital . The former creates intraday credit exposures due to mismatches of unsynchronised ( FoP ) deliveries , and the latter consumes intraday liquidity due to the cash payment legs of ( DvP ) settlements . Banks are forced to maintain buffers of liquidity and collateral to manage these exposures caused by unspecified and imprecise settlement windows . The evolving focus on intraday liquidity and credit management has naturally created an opportunity in the market for an operating model that helps improve collateral mobility , streamline operational processes , and reduce settlement fails . This is where HQLA x comes into play , as it harnesses the unique capabilities of the blockchain ledger to eliminate many of the inefficiencies associated with traditional collateral management . Not only could you fill this page with current achievements , but the pipeline is equally as long . Backed by two rounds of investment , the fintech says it has multiple use-cases in its product pipeline including VM , triparty Access and DvP . “ As a result of the market volatility of the pandemic we received significant interest from clients and potential future clients for a use case that manages margin exposures , we intend to introduce this to our product offering in the coming months .
“ In H1 2023 we plan to roll out triparty Access , which will enable clients to offramp securities from the HQLA x ledger to all the major Triparty Agents in Europe . Our current operating model caters for non-cash ownership transfers , however we have plans to expand our product suite to include DvP in the future .” The securities lending landscape is evolving , and HQLA x says it is seeing monumental shifts from the traditional way of collateral management to new ecosystems created with new technology .
Notable partners and collaborators : BNY Mellon , Goldman Sachs , JP Morgan , Citi , ING , Deutsche Boerse , R3 , BNP Paribas Securities Services
34 Global Custodian Fall 2022