MT504 — Collateral Proposal
The giver's collateral proposal in response to a margin call. Cash, Bunds, Treasuries, rated corporate bonds: the message lists each proposed asset with its applicable haircut and post-haircut value.
Purpose
MT504 proposes the assets that will cover the margin call made by MT503. The giver typically has two basket types to propose:
- Cash collateral — direct transfer in the CSA's termination currency. No haircut, interest paid at an agreed rate (EONIA / €STR for EUR, SOFR for USD).
- Securities collateral — eligible securities (typically AAA-AA government bonds, sometimes IG corporate bonds, rarely equities). Subject to a contractual haircut (1-15%) that reduces the post-haircut value.
The exposed party checks: (a) security eligibility in the CSA list, (b) consistency of the applicable haircut, (c) that the sum of PSTV (post-haircut value) does cover the requested MARG. If OK, tacit acceptance and settlement; if KO, counter-MT504 or switch to MT505 (substitution).
Sequence structure
- GENL — General Information: MT504 reference (SEME) and original MT503 reference (RELA).
- COLLPRTY — Collateral Parties: identical to MT503 (PTYA, PTYB, SAFE).
- DEALTRAN — Deal Transaction: requested settlement date, MARG amount carried over from MT503.
- COLLDET — Collateral Details: one sub-sequence per proposed asset, with instrument, quantity, market value and post-haircut value.
Block 4 tags
| Tag | Name | Format | Usage |
|---|---|---|---|
:20C: | Reference | :4!c//16x | SEME, RELA (linked MT503 reference). |
:35B: | Instrument | 4*35x | ISIN + name of the proposed security. |
:36B: | Quantity | :4!c//4!c/15d | AGGR (aggregate quantity), FAMT (face amount) for bonds. |
:19A: | Amount | :4!c//[N]3!a15d | MARG (margin to cover), MKTV (market value), PSTV (post-haircut value), HACC (cash collateral amount). |
:90A: | Price | :4!c//3!a/15d | MRKT (market price), DEAL (deal price). |
:92A: | Rate | :4!c//[N]15d | HALF (haircut percentage), MARG (margin rate). |
:98A: | Date | :4!c//8!n | SETT (settlement date for the proposed collateral movement). |
Real-world example
Deutsche Bank → BNP Paribas response to the 70,000 EUR call. The giver proposes 75,000 EUR nominal on a 2027 Bund (valued at 99.00, 2% haircut) which gives 72,765 EUR post-haircut, sufficient to cover the call:
{1:F01DEUTDEFFXXXX0000000000}{2:I504BNPAFRPPXXXXN}{3:{108:CP20260517001}}{4:
:16R:GENL
:20C::SEME//CP20260517001
:20C::RELA//CC20260516001
:23G:NEWM
:98A::PREP//20260517
:22F::COLA//MARG
:16S:GENL
:16R:COLLPRTY
:95P::PTYA//BNPAFRPPXXX
:95P::PTYB//DEUTDEFFXXX
:97A::SAFE//CSA-2024-001
:16S:COLLPRTY
:16R:DEALTRAN
:98A::SETT//20260518
:19A::MARG//EUR70000,00
:16R:COLLDET
:35B:ISIN DE0001102408
BUNDESANLEIHE 0% 02/2027
:36B::AGGR//FAMT/75000,00
:19A::MKTV//EUR74250,00
:90A::MRKT//EUR99,00
:92A::HALF//2,00
:19A::PSTV//EUR72765,00
:16S:COLLDET
:16S:DEALTRAN}:20C::RELA//CC20260516001— original MT503 reference.:35B:ISIN DE0001102408— 2027 Bund (German government bond).:36B::AGGR//FAMT/75000,00— 75,000 EUR nominal proposed.:19A::MKTV//EUR74250,00— market value (75,000 × 99.00 / 100).:90A::MRKT//EUR99,00— Bund market price (clean price).:92A::HALF//2,00— 2% haircut per CSA grid.:19A::PSTV//EUR72765,00— post-haircut value (74,250 × 0.98).
Common pitfalls
- PSTV < MARG — total post-haircut value must ≥ called margin. A proposal undercovering the call is rejected by the exposed party.
- Ineligible security — every CSA has its own eligible instrument list. Proposing a junk-rated corporate bond in a CSA that only accepts AAA is a classic reject → mandatory explanatory narrative.
- Self-applied haircut — the giver must apply the agreed haircut, not its own. A discrepancy between proposed HALF and contractual HALF triggers an MT507 dispute.
- SETT date too late — typically T+1 business day after MT504. A more distant date (T+3) does not respect CSA timing and exposes to technical default.
- Multiple COLLDET not summed — if several securities are proposed, the sum of PSTV must cover MARG. Always check the total on the ETL side before sending.
ISO 20022 equivalent
- colr.004 — Margin Call Response (direct equivalent).
- colr.006 — Margin Call Dispute Notification (in case of disagreement).
- Optional migration, no CBPR+ deadline on the colr family.