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Collateral then, blockchain now
Steven Griffiths, founder of Absolute Collateral, considers how blockchain is following the same path collateral once did — moving steadily upstream as markets rethink where critical trading decisions should sit
Image: Absolute Collateral
I often start these conversations the same way: “Where does collateral sit in your organisation?” Ten years ago, the answer was easy — back office. After the trade. Someone else’s problem. Pricing came first and execution followed. Collateral was something you sorted out once the deal was done. That worked… until it didn’t.
At some point, it was realised that funding costs weren’t just about the rate.
Balance-sheet efficiency wasn’t just about appetite, and the problems they were firefighting after execution were actually being caused by decisions made much earlier.
- Collateral selection decisions made upstream were later reflected in funding costs at execution.
- Eligibility criteria defined earlier shaped which trades were feasible when execution was attempted.
- Optimisation that was treated as a post-trade activity was already influencing outcomes before execution.
So collateral started to move. First into the middle office, then, quietly, into the front office.
Not because anyone wanted more complexity, but because the outcome of the trade was already being shaped before execution. Once that clicked, the shift felt inevitable.
And now the same conversation is happening about blockchain.
Blockchain tends to come up the same way collateral once did.: “It’s a settlement thing, right?”, “A post-trade upgrade?”, “Something ops will deal with?”
That’s not a wrong instinct. Early use cases have focused exactly there — faster settlement, better records, and fewer breaks. But the conversation changes once you look a bit closer.
As settlement logic, asset representation, and lifecycle rules start living on the rail itself, you begin to see the same pattern again. If key decisions are left until execution constraints appear late, trades slow down or fail, and desks start pricing defensively. Not because anyone’s doing a bad job, but because decisions are being made too far downstream.
Where the decisions are actually going
At some point in the discussion, the realisation lands — this isn’t about technology, it’s about where decisions sit. As with collateral, the important decisions are moving upstream, away from execution and into framing.
This raises the questions of, who is eligible, under what access rules, and using which acceptable structures?
By the time a trade is placed, most of the outcome is already determined:
- Execution should rely on dependable mechanics (rails) rather than improvisation.
- The structure should support consistent decision-making even as market conditions vary.
- Surprises should be the exception.
Once the rail itself carries logic, discovering constraints at the moment of execution no longer makes sense.
The simple rule I keep coming back to
When I try to simplify it, it usually comes down to one thing — when the rail carries logic, decisions move upstream.
Collateral followed this path over time, and blockchain is now entering a comparable phase. The focus is less on technology choices and more on how market structure adjusts as new infrastructure is adopted further up the trade flow.
Why this matters in practice
This isn’t about traders, sales teams, or custodians becoming technologists — it’s about where their decisions now sit. As infrastructure evolves, decisions that were once made late — at execution or settlement — are moving earlier in the process. The role of the market participant shifts accordingly. When blockchain is treated purely as a back office implementation detail, constraints tend to surface downstream as settlement friction, execution hesitation, or defensive pricing.
Those outcomes aren’t failures of execution, they’re signals that key decisions were made too late. Moving decisions upstream allows each role to operate more clearly within its mandate:
Traders define eligibility, access, and acceptable structures in advance, so execution reflects market conditions rather than last-minute judgement.
Sales teams frame relationships around known access and repeatable structures, rather than negotiating exceptions trade by trade.
Custodians and operations teams support predictable flows, because the logic governing settlement and lifecycle events is already set. This doesn’t make outcomes uniform — every trade is still different. It means the mechanics are dependable enough that variation comes from the market, not the plumbing. When eligibility, access, and acceptable structures are set upstream, execution no longer depends on escalation, intervention, or timing luck. What shows up at execution reflects earlier decisions rather than late discovery.
That’s the point at which execution stops being an event and becomes a normal consequence of prior choices — and when trades no longer require special handling to complete, the market is doing what it exists to do.
At some point, it was realised that funding costs weren’t just about the rate.
Balance-sheet efficiency wasn’t just about appetite, and the problems they were firefighting after execution were actually being caused by decisions made much earlier.
- Collateral selection decisions made upstream were later reflected in funding costs at execution.
- Eligibility criteria defined earlier shaped which trades were feasible when execution was attempted.
- Optimisation that was treated as a post-trade activity was already influencing outcomes before execution.
So collateral started to move. First into the middle office, then, quietly, into the front office.
Not because anyone wanted more complexity, but because the outcome of the trade was already being shaped before execution. Once that clicked, the shift felt inevitable.
And now the same conversation is happening about blockchain.
Blockchain tends to come up the same way collateral once did.: “It’s a settlement thing, right?”, “A post-trade upgrade?”, “Something ops will deal with?”
That’s not a wrong instinct. Early use cases have focused exactly there — faster settlement, better records, and fewer breaks. But the conversation changes once you look a bit closer.
As settlement logic, asset representation, and lifecycle rules start living on the rail itself, you begin to see the same pattern again. If key decisions are left until execution constraints appear late, trades slow down or fail, and desks start pricing defensively. Not because anyone’s doing a bad job, but because decisions are being made too far downstream.
Where the decisions are actually going
At some point in the discussion, the realisation lands — this isn’t about technology, it’s about where decisions sit. As with collateral, the important decisions are moving upstream, away from execution and into framing.
This raises the questions of, who is eligible, under what access rules, and using which acceptable structures?
By the time a trade is placed, most of the outcome is already determined:
- Execution should rely on dependable mechanics (rails) rather than improvisation.
- The structure should support consistent decision-making even as market conditions vary.
- Surprises should be the exception.
Once the rail itself carries logic, discovering constraints at the moment of execution no longer makes sense.
The simple rule I keep coming back to
When I try to simplify it, it usually comes down to one thing — when the rail carries logic, decisions move upstream.
Collateral followed this path over time, and blockchain is now entering a comparable phase. The focus is less on technology choices and more on how market structure adjusts as new infrastructure is adopted further up the trade flow.
Why this matters in practice
This isn’t about traders, sales teams, or custodians becoming technologists — it’s about where their decisions now sit. As infrastructure evolves, decisions that were once made late — at execution or settlement — are moving earlier in the process. The role of the market participant shifts accordingly. When blockchain is treated purely as a back office implementation detail, constraints tend to surface downstream as settlement friction, execution hesitation, or defensive pricing.
Those outcomes aren’t failures of execution, they’re signals that key decisions were made too late. Moving decisions upstream allows each role to operate more clearly within its mandate:
Traders define eligibility, access, and acceptable structures in advance, so execution reflects market conditions rather than last-minute judgement.
Sales teams frame relationships around known access and repeatable structures, rather than negotiating exceptions trade by trade.
Custodians and operations teams support predictable flows, because the logic governing settlement and lifecycle events is already set. This doesn’t make outcomes uniform — every trade is still different. It means the mechanics are dependable enough that variation comes from the market, not the plumbing. When eligibility, access, and acceptable structures are set upstream, execution no longer depends on escalation, intervention, or timing luck. What shows up at execution reflects earlier decisions rather than late discovery.
That’s the point at which execution stops being an event and becomes a normal consequence of prior choices — and when trades no longer require special handling to complete, the market is doing what it exists to do.
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