Euroclear to help source and mobilise collateral across borders
Euroclear will create an open
global market infrastructure to source and move collateral across borders.
Users of the collateral
management provider’s Collateral Highway will be able to move securities from
wherever they are held to serve as collateral for access to central bank
liquidity, secured transactions such as repos and securities loans, and margins
for central counterparties (CCPs) and bilaterally cleared OTC derivative
The Collateral Highway will
have multiple collateral entry and exit points. The entry points are where
collateral will be sourced from all Euroclear central securities depositories (CSDs),
agent banks (BNP Paribas Securities Services is the first to join), clearers
and CSDs located in any timezone (the Central Moneymarkets Unit of the Hong
Kong Monetary Authority is the first to join). The securities will then be
transported to where they are needed as collateral. The Collateral Highway is
open to all CCPs, CSDs, central banks, global and local custodians, investment
and commercial banks. Custodians, agent banks and CSDs without a collateral
management service offering will be able to use the Collateral Highway as their
own for their domestic clients.
Saheed Awan, global head of
collateral management services at Euroclear said the focus is on two areas –
collateral management across silos and collateral optimisation.
He added the fact that
securities are kept in a certain locations creates scenarios where the
securities held as collateral are often “locked” in a particular timezone or
market, reducing collateral management efficiency and securities optimisation
for cross-border collateral purposes. “We aim to resolve this problem by
providing the infrastructure to move collateral where and when it is needed, no
matter where it is held,” he said.
As part of its mission,
Euroclear, which manages more than €500 billion of collateral outstanding, has
developed open inventory sourcing technology to keep track of the collateral
positions deposited by clients in various locations. Whereas Euroclear’s
conventional triparty collateral management system sourced securities for
collateral held only in Euroclear Bank, it will be able to search and manage
virtually all client asset positions and, via the Collateral Highway, move the
right collateral to the right collateral taker using automated processes.
Euroclear will also monitor, value and substitute securities used as collateral
when and if needed during the lifecycle of the transaction, and return the
securities to the original place of deposit when they are no longer needed.
Jo Van de Velde, managing
director and head of product management at Euroclear, commented that given the
amount of collateral required through the new regulation, it is important that
the market has a systemic and open solution to maximise collateral availability
and mobility across borders 24 hours per day.
Reporting by Janet du Chenne, Global Custodian, an Asset International publication