Euroclear partners with DTCC; Clearstream to follow
13 May 2013 Brussels and New York
Image: Shutterstock
Euroclear and The Depository Trust & Clearing Corporation (DTCC) have signed a MoU to create a joint collateral processing service that hopes to significantly increase efficiency, reduce risk and support the growing collateral needs of industry participants.
Initially, the joint services will offer automatic transfer and segregation of collateral based on agreed margin calls relating to over-the-counter derivatives and other collateralised contracts.
“This will significantly reduce settlement risk, increase transparency around collateral processing on a global basis and will provide maximum asset protection for all participants,” said a statement from Euroclear.
DTCC and Euroclear will also establish mutual links, permitting firms to manage collateral held at both firms' depositories as a single pool.
The joint service, stated the release, will be operated as an “industry cooperative” and will provide open and non-discriminatory access to all other collateral processing providers, including custodians, CSDs and ICSDs, that wish to link their services to the joint service.
Tim Howell, CEO of Euroclear said: “As demand for collateral increases, both DTCC and Euroclear are each developing our own means to ease collateral sourcing and mobilisation for clients. Euroclear’s global Collateral Highway is a key part of our strategy to deliver such an infrastructure.”
“The industry is focused on collateral management as a result of concerns over how to address operational and counterparty credit risk while navigating the changing regulatory landscape,” said Michael Bodson, DTCC’s president and CEO.
“DTCC’s Margin Transit Utility, currently under development, will help mitigate risks, lower costs and create greater efficiencies, by providing straight-through-processing to help satisfy obligations of clients. We look forward to leveraging the strengths of both institutions to meet the collateral needs of industry participants.”
A source also reported that Clearstream will soon announce a similar arrangement with DTCC. The clearing firm announced a partnership with DTCC in November 2011, whereby it would leverage DTCC’s Loan/SERV Reconciliation Service and offer it in the first half of 2012. Plans were also made to develop bilateral loan services, built on DTCC’s existing Loan/SERV platform and integrated with Clearstream’s collateral management platform.
Initially, the joint services will offer automatic transfer and segregation of collateral based on agreed margin calls relating to over-the-counter derivatives and other collateralised contracts.
“This will significantly reduce settlement risk, increase transparency around collateral processing on a global basis and will provide maximum asset protection for all participants,” said a statement from Euroclear.
DTCC and Euroclear will also establish mutual links, permitting firms to manage collateral held at both firms' depositories as a single pool.
The joint service, stated the release, will be operated as an “industry cooperative” and will provide open and non-discriminatory access to all other collateral processing providers, including custodians, CSDs and ICSDs, that wish to link their services to the joint service.
Tim Howell, CEO of Euroclear said: “As demand for collateral increases, both DTCC and Euroclear are each developing our own means to ease collateral sourcing and mobilisation for clients. Euroclear’s global Collateral Highway is a key part of our strategy to deliver such an infrastructure.”
“The industry is focused on collateral management as a result of concerns over how to address operational and counterparty credit risk while navigating the changing regulatory landscape,” said Michael Bodson, DTCC’s president and CEO.
“DTCC’s Margin Transit Utility, currently under development, will help mitigate risks, lower costs and create greater efficiencies, by providing straight-through-processing to help satisfy obligations of clients. We look forward to leveraging the strengths of both institutions to meet the collateral needs of industry participants.”
A source also reported that Clearstream will soon announce a similar arrangement with DTCC. The clearing firm announced a partnership with DTCC in November 2011, whereby it would leverage DTCC’s Loan/SERV Reconciliation Service and offer it in the first half of 2012. Plans were also made to develop bilateral loan services, built on DTCC’s existing Loan/SERV platform and integrated with Clearstream’s collateral management platform.
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