Challenging market hits Clearstream GSF volumes
19 May 2016 Frankfurt
Image: Shutterstock
Clearstream’s global securities financing (GSF) business endured its fourth consecutive month of volume dips, with a 16 percent drop-off in both year-to-year for April and monthly average volume figures for 2016 so far.
The Deutsche Börse subsidiary’s GSF volumes for 2016 have so far failed to match last year’s monthly volumes, reaching €530.11 billion in April, down from €628.35 billion at the same point in 2015.
Monthly average volume data for 2016 also registered a fall to €530.2 billion from €628.41 billion in 2015.
Philippe Seyll, head of global securities financing and co-CEO of Clearstream Banking Luxembourg, blamed challenging market conditions for the decline in outstanding volumes and stated that he expects that the market will see some floor to that development once central bank policies go back to normal.
In a statement on the performance data, Clearstream explained that the greater demand for collateral, driven by the regulatory agenda, makes it more and more attractive to use multiple types of securities as collateral in repo transactions and other exposures.
Therefore, market participants are increasingly using their equities portfolio. Mandatory central clearing of certain derivatives plus more stringent capital ratios are increasing the need for high quality securities as collateral.
At the same time, central bank bond purchasing programmes such as the European Central Bank’s public sector purchase programme have further reduced the available amount of high quality liquid assets in the market.
Seyll expanded on this, saying: "In consequence, more and more market participants are including equities in their collateral eligibility schedules in addition to fixed income.”
“Equities have certain advantages over fixed income: they are transparently priced and can be easily liquidated in the event of a default, either on-exchange or via a broker. In addition, yield on equities can be higher than on fixed income collateral and customers can choose between a wide range of traded terms and currencies."
“This shift towards equities is being hastened by the entry of the buy side into the secured funding market."
The Deutsche Börse subsidiary’s GSF volumes for 2016 have so far failed to match last year’s monthly volumes, reaching €530.11 billion in April, down from €628.35 billion at the same point in 2015.
Monthly average volume data for 2016 also registered a fall to €530.2 billion from €628.41 billion in 2015.
Philippe Seyll, head of global securities financing and co-CEO of Clearstream Banking Luxembourg, blamed challenging market conditions for the decline in outstanding volumes and stated that he expects that the market will see some floor to that development once central bank policies go back to normal.
In a statement on the performance data, Clearstream explained that the greater demand for collateral, driven by the regulatory agenda, makes it more and more attractive to use multiple types of securities as collateral in repo transactions and other exposures.
Therefore, market participants are increasingly using their equities portfolio. Mandatory central clearing of certain derivatives plus more stringent capital ratios are increasing the need for high quality securities as collateral.
At the same time, central bank bond purchasing programmes such as the European Central Bank’s public sector purchase programme have further reduced the available amount of high quality liquid assets in the market.
Seyll expanded on this, saying: "In consequence, more and more market participants are including equities in their collateral eligibility schedules in addition to fixed income.”
“Equities have certain advantages over fixed income: they are transparently priced and can be easily liquidated in the event of a default, either on-exchange or via a broker. In addition, yield on equities can be higher than on fixed income collateral and customers can choose between a wide range of traded terms and currencies."
“This shift towards equities is being hastened by the entry of the buy side into the secured funding market."
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