GlobalCollateral Expands Footprint
DTCC-Euroclear Global Collateral Ltd. (GlobalCollateral), an award-winning joint venture of Euroclear and The Depository Trust & Clearing Corporation (DTCC), today announced that the Margin Transit Utility (MTU) collateral settlement infrastructure community continues to grow, as the firm moves beyond its pilot production phase.
Driven by their clients’ needs to reduce risks related to operational, liquidity and counterparty risks, leading dealers Goldman Sachs, J.P. Morgan, Morgan Stanley, Societe Generale, UBS and Wells Fargo are among the latest organizations to adopt MTU. These dealers join over 30 investment management, administrator and custodian firms, including Brandywine Global Investment Management, Fidelity International, Franklin Templeton, Vanguard and Brown Brothers Harriman (BBH) who have adopted the service.
MTU straight-through-processing is designed to offer improved efficiency for the transfer of collateral among market participants, by centralizing communications and settlement instructions within MTU. The service includes connectivity from AcadiaSoft’s MarginSphere and ALERT for enriched standing settlement instructions (SSIs), connectivity to custodians and triparty providers, confirmation of settlement, and standardized reporting.
GlobalCollateral was established to help firms address an array of collateral- and liquidity-related needs that have become more acute in recent years as regulatory mandates have extended their reach. Specifically, mandatory clearing of standardized derivatives and new margin requirements for non-centrally-cleared derivatives are boosting the number of margin calls. This activity is stressing traditional manual processes and creating the need to simplify collateral settlement processing and optimize the use of collateral. Furthermore, collateral mobility across borders and within the U.S. domestic market is needed to match global demand for high-quality liquid assets.
“We see MTU as an important utility solution to address challenges related to the manual processing of collateral settlements as well as the expected increase in volumes and frequency,” stated Joseph Spiro, NY Head of Collateral at Societe Generale. “Manual processes and scalability challenges are prevalent across the industry, and MTU will help to automate triparty and bilateral margin calls for both segregated and non-segregated accounts to better support clients and reduce settlement fails.”
“Calculating margin calls, generating and affirming calls and determining eligible collateral, and then instructing our custodian with real-time settlement updates and end-of-day position reporting, will significantly reduce operational, counterparty and liquidity risks,” said John Montgomery, Senior Specialist, Global Collateral at Vanguard. “Leveraging MTU in conjunction with AcadiaSoft’s MarginSphere and our collateral management system will greatly increase our overall collateral management efficiency beginning with OTC derivatives and then later for TBAs, ETDs and OTC cleared derivatives.”
“MTU is an integral enabler of STP across the margin and collateral management process, and we look forward to partnering with additional clients who leverage MTU to reduce operational risk, drive greater efficiency and increase transparency throughout the collateral management process,” stated Courtney Gavin, Vice President, Custody Product at Brown Brothers Harriman.
“GlobalCollateral continually engages with the industry to explore opportunities to address challenges in the collateral management and processing space,” said Chris Childs, Executive Chairman and Member of the Board, GlobalCollateral. “We’re pleased to welcome a number of leading dealers to our growing MTU community and look forward to expanding our solutions to continue to meet the evolving needs of the dealer, buy-side and custodian communities.”
Less risk and increased speed will lead to lower costs and improved outcomes for investors.
Initial margin requirements for centrally cleared markets increased by $300bn over March 2020.
Phase 5 of the uncleared margin rules came into effect on 1 September.
Smaller entities come into scope in phase five of the uncleared margin regulations on September 1.
This is part of BlackRock’s multi-year investment in the Aladdin platform’s derivatives functionality