Commerzbank and Clearstream Launch OTC Service

Terry Flanagan

Commerzbank and Clearstream have launched a service offering clients increased efficiency, reduced risk and seamless processing to cleared and uncleared OTC derivative transactions.

The new TradeCycle service, which will be launched in the fall of 2013, will provide clients access to an integrated management platform for the OTC derivative trade lifecycle from trading to clearing, settlement and custody, including key services such as advisory, valuation, and collateral management.

Market participants will benefit from an end-to-end solution for the handling of OTC derivatives which will allow them to minimize operational inefficiencies, funding costs, enhance yield and improve their risk management as well as being prepared for future regulatory requirements such as Emir or MiFID/ MiFIR.

“Regulatory requirements increase the complexity in the day to day business of financial institutions and corporates and there is growing demand for streamlined services,” said Nikolaus Giesbert, divisional board member for fixed income & currencies at Commerzbank Corporates & Markets. “Clients with too many vendors engaged in OTC derivative transactions risk significantly higher funding expenses. Our holistic TradeCycle solution and effective collateral management strategies reduce operational inefficiencies and costs.”

Derivatives trading and market infrastructures have been brought to the forefront of regulatory attention and regulators have set in motion mandatory requirements which financial institutions and corporates will have to meet.

As the market becomes more fragmented, it is not uncommon for clients to engage with a large number of banks and vendors to complete one single transaction, leading to increased costs and inefficiencies. TradeCycle will simplify this process for clients by managing all their OTC derivatives trades across the entire value chain from one single point of access.

“For the first time, a bank and an independent infrastructure provider are partnering to offer an end-to-end derivatives solution for the industry,” said Stefan Lepp, member of the executive board and head of global securities financing at Clearstream. “The offering is tailor-made, aimed at tackling market inefficiencies, saving funding costs and reducing overhead costs. Such partnership models allow us to meet the needs of the market participants in a very short time-to-market. TradeCycle will provide significant relief to our mutual clients in light of the upcoming regulatory challenge.”

Clearstream earlier this year introduced a new legal master agreement for triparty repo transactions to enable market participants to sign one contract for multiple counterparties.

Clearstream Repurchase Conditions (CRC), a master agreement governed by Luxembourg law, effectively enables customers to be able to trade with their chosen counterparties within just a few days.

The CRC is proving to be of particular interest to new players in the repo market who are currently deterred by the existing lengthy contract negotiation process.

Clearstream developed the CRC to deliver a refined and simplified contract that offers a workable framework to satisfy the growing marked demand that goes hand-in-hand with new market segments entering the repo space.

The CRC is available to customers on both the buy and sell-sides and is expected to appeal to corporates entering into reverse repos to secure their financing and then re-use the collateral they receive to cover OTC derivative margin requirements with clearing members or CCPs.

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