Clearstream Focuses on Collateral Mobilisation

Shanny Basar

Philippe Seyll, head of Global Securities Financing at Clearstream, said the locations where clients can globally mobilise collateral have not increased at the same pace as the need for collateral.

More collateral is required as regulators have increasingly forced over-the-counter products into central clearing, requiring counterparties to post collateral with clearing houses. In addition from September, larger banks will have to start exchanging margin on uncleared derivatives which cannot be cash, needs to be segregated and cannot be re-used. Buyside firms will have to start exchanging margin from next year.

Seyll told Markets Media: “Customers and market participants have indicated that they are considering using equities as eligible collateral and it is high on their agenda.”

The Bank of England has also started work on accepting equities collateral on a “no technical obstacles” basis in certain circumstances – such as during a financial market stress – by early next year.

Clearstream, the international central securities depository owned by Deutsche Börse, has supported equities as eligible collateral since 2009. Seyll added that equities can be held within the same single-account structure at Clearstream together with fixed income and cash.

“We also have an initiative which accommodates margin exchanges through the Clearstream Pledge Contract. The contract sits alongside existing ISDA and CSA agreements to offer clients connections to all multilateral participants,” he said.

In addition Clearstream has amended its legal framework in anticipation of the requirements from the International Organization of Securities Commissions and The Basel Committee on Banking Supervision for margin exchanges on uncleared derivatives and worked on refining its web-based interface so clients have enhanced access to the Liquidity Hub.

Philippe Seyll, Clearstream

Philippe Seyll, Clearstream

Clearstream’s global securities financing services – including securities lending, borrowing and collateral management in cash, fixed income and equities – are bundled under the Global Liquidity Hub. The collateral management system covers all types of exposures in real-time, across currencies, asset classes and time zones.

“As the need for collateral increases so does the need for clients to mobilise their assets anywhere in the world from one platform; and we are in that game,” said Seyll.

The Global Liquidity Hub has partnerships with electronic trading platforms, central counterparties, central securities depositories and agent banks, so that customers can cover all their exposures from one platform.

“What is for sure is that there is an increased need for collateral while the locations where clients can mobilise collateral have not increased at the same pace,” added Seyll. “We have a solution for that, it is very easy for our clients to globally mobilise collateral on our books. If it is not on our books they can use our Liquidity Hub Connect to link to other custodians and our partners at the Liquidity Alliance to link to local CSDs.”

Deutsche Börse reported that GSF services had a monthly average outstanding of €598.6bn in 2015, a decrease of 2% from 2014.

The yearly average of the value of assets under custody held on behalf of customers at Clearstream reached €13.3 trillion last year, an increase of 9% from 2014. Clearstream also processed 44.1 million international transactions last year, a rise of 1% compared to 2014.

Jeffrey Tessler, chairman of Clearstream and member of the Deutsche Börse executive Board responsible for the Clients, Products & Core Markets division, said in a statement: “In 2015 our assets under custody grew once again. Deutsche Börse has combined the businesses of Clearstream, Eurex and ISE businesses in the new division Clients, Products & Core Markets. This enables us to respond more effectively to the needs of the market.”

Featured image by Sarah Allison/Dollar Photo Club


Related articles

  1. Buy Side Forced to Review Collateral Arrangements

    As rates and volatility rise, the need to optimise the value of collateral is greater than ever.

  2. CEDX is planning to expand its range of products in 2023, subject to regulatory approvals.

  3. The CFTC regulated derivatives market and clearer was not included in FTX's bankruptcy filing.

  4. Schroders cleared NDF trades across a Asian and Latam currency pairs via Citi.

  5. The derivatives venue owned by FTX wanted to offer products that were not fully collateralized.