Clearstream and BNP Paribas Securities Services have signed a letter of intent to cooperate further on collateral management. BNP Paribas customers will be able to consolidate their collateral holdings, via Clearstreams Global Liquidity Hub, to cover their global exposures from a single optimized collateral pool. The hub engine will allocate, optimize and substitute collateral on an automated basis across the books of BNP Paribas. Client assets will remain with BNP Paribas or the relevant CSD while Clearstream manages global collateral allocation, optimization and exposure coverage.
The hub solution is offered to buy side and sell side firms to reduce operational risks, operational costs and opportunity cost resulting from collateral fragmentation. Additionally, mutual clients of BNP Paribas and Clearstream will be able to pool and optimize collateral positions held in custody across the two organizations against the exposures covered by Clearstreams Global Liquidity Hub.
With the partnership, Clearstream has added a fourth layer to its Global Liquidity Hub initiative: partnerships with agent banks. Liquidity Hub Connect builds on our established quad-party collateral management service established with them five years ago, said Jeffrey Tessler, CEO of Clearstream. In addition to adding further agent banks to the model Tessler says Clearstream will continue to grow the pillars of the Global Liquidity Hub by entering further strategic partnerships with market infrastructures such as CSDs, accessing further CCPs and signing further agreements for central bank money access on a global basis.
Alain Pochet, head of Clearing, Settlement and Custody at BNP Paribas Securities Services, said: We are committed to providing our clients with maximum flexibility to manage their collateral requirements across key markets while delivering bespoke domestic and global settlement and custody services. Strategic partnerships, such as this first one with Clearstream, complement perfectly our collateral management offer as bilateral agent for buy side and sell side institutions.
This latest development builds on partnerships Clearstream’s Liquidity Hub GO (Global Outsourcing) initiative launched with Cetip, the Brazilian CSD, in July 2011. Liquidity Hub GO is now also being discussed with the Australian Securities Exchange and Strate, the South African CSD.
(JDC)