Collateral Cooperation
15 June 2010 Luxembourg
Image: Shutterstock
Clearstream, the international central securities depository (ICSD) and CETIP, the Brazilian CSD which operates the leading marketplace for fixed income securities and over-the-counter (OTC) derivatives in Latin America, have signed an agreement to jointly develop, promote and distribute triparty collateral management services.
This agreement paves the way for a multi-time-zone collateral management insourcing offering in real-time and is in line with the observed trends towards a global consolidation of collateral management activities. The new service will provide CETIP's clients in their time zone with the opportunity to have access to the collateral management pioneering services of Clearstream focusing initially on the collateralisation of OTC derivative exposures managed via CETIP.
In a first phase, the Triparty Collateral Management Services will enable Brazilian participants to mobilize assets eligible at CETIP and SELIC, the central depository of securities issued by the National Treasury and the Banco Central do Brasil, and a DVP settlement system for outright and repo transactions with these securities. It is envisaged to eventually target also assets eligible at Clearstream in order to fulfil their collateral obligations out of one virtual collateral pool. This service will be offered on a fully automated basis incorporating auto-allocation, auto-substitutions and optimisation of the underlying collateral. Both parties plan to further extend the service range in the space of collateral management over the coming years to further strengthen the value proposition for the Brazilian market. Clearstream is a leading service provider in Liquidity and Collateral Management in Europe with monthly average outstanding averaging €509.6 billion in May 2010. CETIP is the market leader for the registration of OTC derivatives in Brazil and will extend its offering to include optional exposure matching and calculation services.
Luiz Fernando Vendramini Fleury, CEO of CETIP, said: "The Triparty Collateral Management Services established with Clearstream is a pioneering and best-practice solution for the Brazilian OTC derivatives market. It will notably enable a streamlined risk mitigation so demanded by the Brazilian Capital Markets. Moreover, CETIP and Clearstream expect to strengthen this cooperation by developing further projects of mutual interest which may go beyond the area of Collateral Management."
Jeffrey Tessler, CEO of Clearstream, said: "This cooperation will allow CETIP's clients to benefit from the unique service range in Clearstream's Liquidity Hub. This service will improve efficiency in the area of exposure collateralization and help Brazilian customers to further strengthen their risk profiles across their activities. The wide range of services, the high degree of automation coupled with the 'open architecture' concept of the Liquidity Hub supported this agreement which paves the way for further collateral insourcing initiatives across the globe."
This agreement paves the way for a multi-time-zone collateral management insourcing offering in real-time and is in line with the observed trends towards a global consolidation of collateral management activities. The new service will provide CETIP's clients in their time zone with the opportunity to have access to the collateral management pioneering services of Clearstream focusing initially on the collateralisation of OTC derivative exposures managed via CETIP.
In a first phase, the Triparty Collateral Management Services will enable Brazilian participants to mobilize assets eligible at CETIP and SELIC, the central depository of securities issued by the National Treasury and the Banco Central do Brasil, and a DVP settlement system for outright and repo transactions with these securities. It is envisaged to eventually target also assets eligible at Clearstream in order to fulfil their collateral obligations out of one virtual collateral pool. This service will be offered on a fully automated basis incorporating auto-allocation, auto-substitutions and optimisation of the underlying collateral. Both parties plan to further extend the service range in the space of collateral management over the coming years to further strengthen the value proposition for the Brazilian market. Clearstream is a leading service provider in Liquidity and Collateral Management in Europe with monthly average outstanding averaging €509.6 billion in May 2010. CETIP is the market leader for the registration of OTC derivatives in Brazil and will extend its offering to include optional exposure matching and calculation services.
Luiz Fernando Vendramini Fleury, CEO of CETIP, said: "The Triparty Collateral Management Services established with Clearstream is a pioneering and best-practice solution for the Brazilian OTC derivatives market. It will notably enable a streamlined risk mitigation so demanded by the Brazilian Capital Markets. Moreover, CETIP and Clearstream expect to strengthen this cooperation by developing further projects of mutual interest which may go beyond the area of Collateral Management."
Jeffrey Tessler, CEO of Clearstream, said: "This cooperation will allow CETIP's clients to benefit from the unique service range in Clearstream's Liquidity Hub. This service will improve efficiency in the area of exposure collateralization and help Brazilian customers to further strengthen their risk profiles across their activities. The wide range of services, the high degree of automation coupled with the 'open architecture' concept of the Liquidity Hub supported this agreement which paves the way for further collateral insourcing initiatives across the globe."
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