treasury liquidity

High levels of treasury liquidity lacking visibility in cross asset operating models

Buy side firms wishing to access treasury liquidity in today’s markets face several challenges. Especially if they are managing a public, private and digital markets diversified fund range, including funds with an immediate or regular liquidity access requirement alongside other asset classes.

In this trilogy of blog posts, we’ll look at the lack of treasury liquidity visibility and ownership within cross asset operating models, and what Investment firms can do to modernise treasury solutions and outcomes better.


The cross-asset operating model is highly fragmented and comprises of legacy technology, bifurcated regional operating models supporting singular asset classes and service capabilities. Added complexity includes multiple trading platforms, venues, various post trade relationships, data providers and regulatory reporting. New digital Fintech adoption often fixes one market infrastructure or capability but adds yet another ‘hop, skip and jump’ to a firm’s busy operating paradigm.

Tactical fixes and shrinking flow returns

In addition to liquidity issues, recently firms have been addressing several challenges across trading, operations, regulations, data providers and systems within business-as-usual operations. These are often supported by tactical plaster fixes or solutions which over time break or result in increased compliance and franchise risks has reached a tipping point. Buy-side firms are seeing very tight margins in flow products which typically execute orders at high volume and performance. Those instruments which have developed high-volume throughput built on straight-through-processing have necessitated a significant technology spend, are seeing shrinking returns. Firms are seeking alpha and internal investment buckets are going tight in this market.

Going forwards, firms need to consider and evaluate operating solutions and technology capabilities within an integrated robust operating service function framework. No longer driven by desk or separate asset class operating or technology needs. A simplified, modernised integrated operating vision and functional framework is not an easy journey. Firm management and accountable executives must align to the committed objectives, benefits, and prioritise investment, make it mandatory!

Successful firm, acceptance and collaboration will eliminate some of the key industry challenges for implementing treasury liquidity capabilities detailed below:
  • The ownership and production of treasury liquidity and reporting is often dispersed across different operating functions including trading, regulatory and risk units with siloed interactions.
  • External party liquidity requirements including overdrafts, buffers, and intraday long box movement monitoring. A well-known challenge is how to deal with monitoring and optimising execution and clearing broker liquidity needs and how to standardise data ingestion and capital needs daily.
  • Collateral ownership, monitoring, and decision-making process. Often multiple process hops involved within cash and collateral intraday liquidity monitoring. Treasury or operations?
  • Sourcing and consuming collateral data is fragmented, normally manually intensive and error prone. Leading to risk events.
  • Complex business and legal entity set up and structure. Difficult to manage and monitor complex CSA liquidity requirements without ad-hoc processes and bespoke support.
  • Treasury trading ownership within existing firm operating model. Does this sit within CIO, COO etc.
  • Forecasting margin requirements. Is your firm passive or active to reviewing broker finance and margin calculations? A lot of focus remains on analytics and not root calculations. Check out our recent blogs ‘How to verify CFD Equity Resets & Financing’ and ‘Have you simplified your fund margining into clearing?’ covering this topic.
  • Trading book of records. Standard legacy SoD approach is the output from the firms back-office accounting systems (often IBOR or FA data) which process the previous EoD figure with all the t+1 trades overnight. Manual intervention, missing real time cash positions, daily corporate actions and the list grows.
  • Oversight trading control. Are supervisory roles and responsibilities defined and understood including support and controls. Documented internal and regulatory policy. Preventative and systematic risk control framework? How does your firm manage 3rd party trading outsource oversight relationships versus internal framework?
  • Spinning up, maintaining, or scaling a treasury team. Hiring, attracting, and not losing treasury talent is hard. Niche domain trading expertise and networks are in hot demand.

In our next blog, we will introduce and discuss the various solution providers available to help modernise treasury operating models for Asset Managers.

Our Transformation Review service is an opportunity for firms to review how to define Treasury services, modernise operating models, review productivity versus industry, modernize and plan for growth.

treasury liquidity operating model

By John Read 

Photo by Mathieu Stern on Unsplash