Clearstream offers JGB triparty trading solution
27 January 2015 Frankfurt
Image: Shutterstock
Clearstream has collaborated with Sumitomo Mitsui Banking Corporation (SMBC) to develop a collateral management service for their mutual customers.
The service is part of Clearstream’s integrated collateral management platform, the Global Liquidity Hub, and will allow companies to consolidate Japanese Government Bonds (JGBs) held across both institutions in to a single pool.
Clients will then be able to perform triparty collateral management transactions, using domestically-held assets for triparty transactions through the liquidity hub.
SMBC will also have access to services including collateral allocation, optimisation and substitution without moving assets out of their custody locations.
Clearstream already provides triparty collateral management services for JGBs through its international central securities depository (ICSD), but the services will now be extended to those under custody with a Japanese bank.
The service will allow clients with bonds in Japanese custody to access international markets and other timezones quickly. It also automatically allocates ‘ideal’ collateral, selecting the cheapest option to match underlying exposure requirements.
When assets are no longer required for triparty purposes, or if they are needed for local settlements in the Japanese market, they will be automatically returned to the customers local settlement account at SMBC.
JGB’s are an attractive option for high-quality collateral because of their investment grade rating, however cross-border mobilisation is typically complex and expensive.
Stefan Lepp, a member of the executive board and head of global securities financing at Clearstream, said: "The market has long been looking for ways to mobilise JGBs locally to meet the growing global demand for high quality collateral.”
“This partnership with SMBC is part of Clearstream’s extensive efforts to give our customers access to a top quality, global pool of collateral to meet upcoming regulations, which will mandate increased central clearing and collateralisation of derivative trades, amongst others.”
“We are very pleased to have SMBC on board for this pioneering solution to mobilise locally held JGBs to cover globally fragmented exposures. This partnership enables our mutual customers to benefit from the best of both worlds; Clearstream’s fully automated global collateral management as well as comprehensive local custodian services by SMBC."
The service is part of Clearstream’s integrated collateral management platform, the Global Liquidity Hub, and will allow companies to consolidate Japanese Government Bonds (JGBs) held across both institutions in to a single pool.
Clients will then be able to perform triparty collateral management transactions, using domestically-held assets for triparty transactions through the liquidity hub.
SMBC will also have access to services including collateral allocation, optimisation and substitution without moving assets out of their custody locations.
Clearstream already provides triparty collateral management services for JGBs through its international central securities depository (ICSD), but the services will now be extended to those under custody with a Japanese bank.
The service will allow clients with bonds in Japanese custody to access international markets and other timezones quickly. It also automatically allocates ‘ideal’ collateral, selecting the cheapest option to match underlying exposure requirements.
When assets are no longer required for triparty purposes, or if they are needed for local settlements in the Japanese market, they will be automatically returned to the customers local settlement account at SMBC.
JGB’s are an attractive option for high-quality collateral because of their investment grade rating, however cross-border mobilisation is typically complex and expensive.
Stefan Lepp, a member of the executive board and head of global securities financing at Clearstream, said: "The market has long been looking for ways to mobilise JGBs locally to meet the growing global demand for high quality collateral.”
“This partnership with SMBC is part of Clearstream’s extensive efforts to give our customers access to a top quality, global pool of collateral to meet upcoming regulations, which will mandate increased central clearing and collateralisation of derivative trades, amongst others.”
“We are very pleased to have SMBC on board for this pioneering solution to mobilise locally held JGBs to cover globally fragmented exposures. This partnership enables our mutual customers to benefit from the best of both worlds; Clearstream’s fully automated global collateral management as well as comprehensive local custodian services by SMBC."
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