CME Clearing Europe, CME Group’s European clearinghouse, settled its first securities transaction through BNY Mellon CSD, the custodian bank’s central securities depository, in late August.
The clearinghouse became the first client of the CSD, which launched in 2012 in response to developments such as European Markets Infrastructure Regulation (EMIR) and TARGET2-Securities (T2S), the harmonized platform for securities in the eurozone.
Article 47.3 of EMIR requires that margin collateral for a central counterparty (CCP) must be segregated and held by the operator of a recognized Securities Settlement System (SSS), such as BNY Mellon CSD. T2S requires market participants to either connect directly to the new settlement platform or to settle their trades through a European CSD, which will connect to the infrastructure between 2015 and 2018.
The CSD will target market participants who will look to engage with the new post-trade landscape that is being shaped by EMIR and T2S. Its pipeline includes issuers and paying agents as well as participants using settlement and/or tri-party collateral management.
Lee Betsill, CEO at CME Clearing Europe, says: “Our relationship with BNY Mellon CSD is important to us because it means that clients can benefit from an additional option in respect of CME Clearing Europe’s collateral protection models, which will in due course include our new fully segregated account structure. This structure ensures that collateral held at a central securities depository is fully segregated at the individual client level, which provides an enhanced level of collateral protection for all scenarios in the event of a bankruptcy.”
CME Clearing Europe also uses SIX Securities Services as its CSD for the Swiss market.
Chris Prior-Willeard, CEO of BNY Mellon CSD says: “We are committed to establishing further links to support CCPs in managing and accessing a wider range of collateral, as well as offering settlement for all market participants.”
As part of its on going build-out program following its establishment as an issuer CSD in December 2012, BNY Mellon CSD established a link with Euroclear Bank in June 2014 as the first step to its transition to investor CSD status. In March of this year, BNY Mellon CSD was accepted as a recognized system for settling transactions in securities listed on the two markets operated by the Luxembourg Stock Exchange.