HSBC Launches OTC Clearing Collateral Service
HSBC Securities Services, part of HSBC’s Global Banking and Markets business, has launched its Over-the-Counter (OTC) Clearing Collateral Service.
The service is designed to support clients in meeting the requirements of the G20 swap clearing reforms now extending into Europe and Asia, which place greater demand on buy-side firms to better manage and mobilise their collateral.
In Europe, the European Market Infrastructure Regulation places new obligations to clear OTC derivatives trades through a central counterparty.
These obligations are due to come into effect for most investment management firms in December 2016. In Asia, similar obligations apply or are due to be implemented by local regulators.
HSBC’s new capability responds to these regulatory changes by providing an independent and highly automated collateral management service. This includes calculation and verification of margins and interest as well as automated margin payments. Collateral movements are processed on a straight-through basis using market standard SWIFT links with custodians.
Reporting is provided online via HSBC’s client portal and includes underlying trade and collateral position information.
Craig Cowe, Head of Collateral Management Product, Securities Services, HSBC, commented: “Incoming regulations to centrally clear OTC derivatives mean that it’s crucial for investment managers to know where their assets are and what they can be used for. We’ve put in place collateral processing hubs in Europe and Asia and have invested significantly in our capability to ensure our clients can keep pace with global regulatory change.”
John Van Verre, Global Head of Custody and Treasury at HSBC, added: “In the past, collateral management has been viewed by many institutional investors as a back office activity. These new regulatory requirements mean that the process is becoming more firmly integrated with the front office, which requires much more proactive management of positions than historically was the case.”
Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.
Temporary equivalence is set to expire on June 30 2022.
IRS trading volumes have fragmented without an equivalence agreement.
Phase 5 of the uncleared margin rules came into effect on 1 September.
Triparty repos can be executed across U.S. Treasury securities to central clearing.