The evolving landscape of intraday liquidity management
27 June 2025
Elisa Poutanen and Erica De Rosa of HQLAX review the evolving intraday liquidity market, the requirements of cash borrowers, and the significance of collaboration for ensuring markets are built for purpose
Image: stock.adobe.com/A-Lex
Financial institutions manage intraday liquidity to ensure they have adequate reserves to meet obligations as they settle throughout the day, as well as manage intraday exposures which result from trading and settlement activities. Traditional intraday liquidity management practices are resource-intensive and costly for banks, as they rely on overnight repo, collateral buffers, and unsecured or secured credit lines which are sub-optimal for managing intraday exposures.
However, the intraday liquidity management landscape is evolving 鈥� the move towards T+1 settlement, increased regulatory scrutiny, and the need for greater operational agility create a new environment in which a more dynamic and efficient approach to intraday liquidity management is needed.
Bank requirements are becoming more specific, where they not only need to have adequate liquidity reserves, but these reserves need to be in certain currencies at certain locations at specific moments in the day. In discussing these developments, Elisa Poutanen, HQLAX sales lead, emphasises that 鈥渢he traditional models are becoming increasingly inefficient and lead to suboptimal use of capital while heightening costs and operational risks鈥�.
Therefore, the need for more robust intraday liquidity management is more prevalent than ever as liquidity managers are looking for innovative, flexible solutions. Banks are looking for additional sources of funding and increased control around intraday liquidity while striving to be as cost effective as possible.
Streamlining intraday liquidity management can lower operational expenses associated with collateral movements, custodian fees, and regulatory compliance. This is why new intraday liquidity markets are forming using new technologies such as distributed ledger technology (DLT) which bring these capabilities to the market.
"Our stress window is an hour or so per day, so we don't need to manage that with a year's worth of buffers." Client quote from HQLAX recent intraday liquidity thought leadership roundtable
Evolving intraday liquidity market
The initial focus for banks in the development of a new intraday liquidity market has been executing intraday repo. Intraday repo is a transaction which opens and closes on the same day, with the opening and closing time specified by the participants.
This allows financial institutions to precisely borrow cash for periods in the day in which they have a liquidity need. For example, if an institution is short euro in the beginning of the trading day, say from 08:00-10:00, they could borrow euro cash for two hours each day to cover that shortfall, rather than transact in the overnight repo market, utilise liquidity buffers, or borrow from credit lines.
By borrowing what they need when they need it, banks reduce their costs of managing intraday liquidity. This also allows them to diversify sources of liquidity by providing access to additional cash providers, creating more liquidity in the market and reducing borrowing costs. Overall, intraday repo can help firms better manage liquidity risk by providing access to flexible and responsive funding sources. It can also reduce reliance on static buffers and enable more accurate forecasting of liquidity needs down to the minute.
鈥淚ntraday repo presents a promising tool,鈥� notes Erica De Rosa, solutions architect at HQLAX, 鈥渙ffering enhanced capital efficiency, reduced operational costs, and improved risk management by transforming liquidity management processes鈥�. This translates into meaningful bottom line impact for large institutions, to the tune of euro tens of millions cost savings per year.
On the cash provider side, it is important to note there are benefits as well, as they can generate incremental revenue by deploying cash intraday. Given there are benefits for both sides of the trade, the development of this market is promising, and HQLAX is seeing positive momentum from both cash borrowers and providers.
Furthermore, a major motivation for banks to source cash via intraday repo is to reduce reliance on unsecured credit lines which receive punitive treatment in liquidity stress-testing models and regulatory ratios. Intraday repo is one way to solve this, but another can be collateralising unsecured credit lines, making them secured.
A barrier to this being done today is lack of collateral mobility, where securities are in one place and cash needs to be in another, creating difficulty in mobilising collateral against the borrowing of cash. But by using DLT, it is possible to immobilise assets sitting in one location and use them against a borrow of cash in another. This allows for the transformation of unsecured credit lines into secured, which alleviates a major pain point of many banks.
Addressing the challenges
While the benefits of intraday repo are appealing, there are few challenges that need to be addressed to ensure those benefits can be materialised. That is why HQLAX is hosting roundtable discussions and working groups to ensure market participants can voice their views, requirements, and preferences as HQLAX works to deliver technology which can facilitate the development of the intraday markets.
One common requirement the firm is hearing from cash borrowers is to receive a term commitment from lenders to provide intraday liquidity over extended periods of time, i.e. every day from 10:00 to 14:00, over a three-month time period.
Receiving such term commitments enables cash borrowers to recognise intraday funding as a stable source of funding, especially until these markets are fully developed and liquid with cash from many different providers. It is paramount for regulators and risk managers to recognise intraday repo as a valid source of funding to facilitate long-term market adoption.
Another challenge (and opportunity) is for intraday cash borrowers to mobilise 鈥榟ard-to-fund鈥� collateral, which would otherwise sit idle and remain trapped as unencumbered assets.
Standardising rules and procedures concerning collateral eligibility and pricing mechanisms is vital, as well as finding common settlement times across market participants.
There are also new operational requirements which financial institutions need to integrate, including the use of a timestamp throughout the trade lifecycle. For technology providers, it is important to ensure there is interoperability across platforms to prevent disparate pools of liquidity from forming.
As emphasised by De Rosa: 鈥淐ollaboration across market participants, regulators, and technology providers is key to ensure these markets are built for purpose and meet the requirements of all stakeholders.鈥� Furthermore, Poutanen highlights that collaboration across the industry is crucial for refining these emerging practices.
鈥淎t HQLAX, we are committed to delivering innovative intraday liquidity solutions by enabling our clients to interoperate seamlessly between our collateral ledger and multiple cash ledgers (including DLT-based cash ledgers and legacy cash rails), and we will continue to evolve our suite of intraday repo solutions based on market demand.鈥�
However, the intraday liquidity management landscape is evolving 鈥� the move towards T+1 settlement, increased regulatory scrutiny, and the need for greater operational agility create a new environment in which a more dynamic and efficient approach to intraday liquidity management is needed.
Bank requirements are becoming more specific, where they not only need to have adequate liquidity reserves, but these reserves need to be in certain currencies at certain locations at specific moments in the day. In discussing these developments, Elisa Poutanen, HQLAX sales lead, emphasises that 鈥渢he traditional models are becoming increasingly inefficient and lead to suboptimal use of capital while heightening costs and operational risks鈥�.
Therefore, the need for more robust intraday liquidity management is more prevalent than ever as liquidity managers are looking for innovative, flexible solutions. Banks are looking for additional sources of funding and increased control around intraday liquidity while striving to be as cost effective as possible.
Streamlining intraday liquidity management can lower operational expenses associated with collateral movements, custodian fees, and regulatory compliance. This is why new intraday liquidity markets are forming using new technologies such as distributed ledger technology (DLT) which bring these capabilities to the market.
"Our stress window is an hour or so per day, so we don't need to manage that with a year's worth of buffers." Client quote from HQLAX recent intraday liquidity thought leadership roundtable
Evolving intraday liquidity market
The initial focus for banks in the development of a new intraday liquidity market has been executing intraday repo. Intraday repo is a transaction which opens and closes on the same day, with the opening and closing time specified by the participants.
This allows financial institutions to precisely borrow cash for periods in the day in which they have a liquidity need. For example, if an institution is short euro in the beginning of the trading day, say from 08:00-10:00, they could borrow euro cash for two hours each day to cover that shortfall, rather than transact in the overnight repo market, utilise liquidity buffers, or borrow from credit lines.
By borrowing what they need when they need it, banks reduce their costs of managing intraday liquidity. This also allows them to diversify sources of liquidity by providing access to additional cash providers, creating more liquidity in the market and reducing borrowing costs. Overall, intraday repo can help firms better manage liquidity risk by providing access to flexible and responsive funding sources. It can also reduce reliance on static buffers and enable more accurate forecasting of liquidity needs down to the minute.
鈥淚ntraday repo presents a promising tool,鈥� notes Erica De Rosa, solutions architect at HQLAX, 鈥渙ffering enhanced capital efficiency, reduced operational costs, and improved risk management by transforming liquidity management processes鈥�. This translates into meaningful bottom line impact for large institutions, to the tune of euro tens of millions cost savings per year.
On the cash provider side, it is important to note there are benefits as well, as they can generate incremental revenue by deploying cash intraday. Given there are benefits for both sides of the trade, the development of this market is promising, and HQLAX is seeing positive momentum from both cash borrowers and providers.
Furthermore, a major motivation for banks to source cash via intraday repo is to reduce reliance on unsecured credit lines which receive punitive treatment in liquidity stress-testing models and regulatory ratios. Intraday repo is one way to solve this, but another can be collateralising unsecured credit lines, making them secured.
A barrier to this being done today is lack of collateral mobility, where securities are in one place and cash needs to be in another, creating difficulty in mobilising collateral against the borrowing of cash. But by using DLT, it is possible to immobilise assets sitting in one location and use them against a borrow of cash in another. This allows for the transformation of unsecured credit lines into secured, which alleviates a major pain point of many banks.
Addressing the challenges
While the benefits of intraday repo are appealing, there are few challenges that need to be addressed to ensure those benefits can be materialised. That is why HQLAX is hosting roundtable discussions and working groups to ensure market participants can voice their views, requirements, and preferences as HQLAX works to deliver technology which can facilitate the development of the intraday markets.
One common requirement the firm is hearing from cash borrowers is to receive a term commitment from lenders to provide intraday liquidity over extended periods of time, i.e. every day from 10:00 to 14:00, over a three-month time period.
Receiving such term commitments enables cash borrowers to recognise intraday funding as a stable source of funding, especially until these markets are fully developed and liquid with cash from many different providers. It is paramount for regulators and risk managers to recognise intraday repo as a valid source of funding to facilitate long-term market adoption.
Another challenge (and opportunity) is for intraday cash borrowers to mobilise 鈥榟ard-to-fund鈥� collateral, which would otherwise sit idle and remain trapped as unencumbered assets.
Standardising rules and procedures concerning collateral eligibility and pricing mechanisms is vital, as well as finding common settlement times across market participants.
There are also new operational requirements which financial institutions need to integrate, including the use of a timestamp throughout the trade lifecycle. For technology providers, it is important to ensure there is interoperability across platforms to prevent disparate pools of liquidity from forming.
As emphasised by De Rosa: 鈥淐ollaboration across market participants, regulators, and technology providers is key to ensure these markets are built for purpose and meet the requirements of all stakeholders.鈥� Furthermore, Poutanen highlights that collaboration across the industry is crucial for refining these emerging practices.
鈥淎t HQLAX, we are committed to delivering innovative intraday liquidity solutions by enabling our clients to interoperate seamlessly between our collateral ledger and multiple cash ledgers (including DLT-based cash ledgers and legacy cash rails), and we will continue to evolve our suite of intraday repo solutions based on market demand.鈥�
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