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BNY Mellon to provide derivatives collateral management services for AP7

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BNY Mellon is providing derivatives collateral management services to Sjunde AP-fonden (AP7) the Swedish state pension fund, which has over EUR8.5bn under management.

Services are being provided via DM Edge, BNY Mellon’s comprehensive derivatives margin management platform. This allows customisation of the margin and collateral process which incorporates the processing, reinvestment and valuation activities associated with posting and receiving collateral for OTC derivative transactions.

BNY Mellon is using DM Edge in conjunction with its Triparty collateral management and Money Funds platforms to support AP7’s equity OTC derivatives trading, assisting with raising cash as collateral, reinvesting cash collateral and calculating margin call amounts. This is the first time that three of the platforms have been combined, offering a collateral management service which is tailored to the fund’s complex requirements.

Andrew Demko, EMEA business manager for Broker Dealer Services at BNY Mellon says: "BNY Mellon has created a solution for AP7 which enables it to maximise the use of its equity collateral. The pension fund has previously found that many market participants will not accept equity as collateral under ISDA agreements. Our solution enables long equity positions to be turned into cash at short notice for use as margin, facilitating the business and avoiding extra costs."

Svante Linder, Chief Operating Officer at AP7, says: "BNY Mellon has helped us solve the problem of collateralising OTC Derivatives when using an equity based portfolio. The market is not favourable to using equities as collateral at the moment and working with BNY Mellon on a combined solution has helped us to overcome operational and legal hurdles."

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