Clearstream is launching OTC Collateral, a bilateral collateral management service enabling customers to cover over-the-counter, tri-party and CCP exposures from a single collateral pool.
Global Liquidity Hub, the company’s integrated risk and liquidity management tool, will support this new optimization service, from Credit Support Annex (CSA) review and administration, mark-to-market, margining, dispute management and portfolio reconciliation to payment and settlement follow-up and reporting.
The service will help to cover derivative exposures, as customers are currently facing the challenge of managing two parallel streams of exposures for cleared and un-cleared collateral trades.
In a bilateral framework, Clearstream acts on behalf of one of the two counterparties. Custody may be in Clearstream (especially in the case of securities collateral) but cash and securities can also be held outside of Clearstream at multiple depositories or cash correspondents.
It compliments the existing tri-party offering, where Clearstream acts as neutral agent for both counterparties providing custody and collateral management for those assets. Now collateral received from bilateral transactions can be readily reused within the tri-party environment. While OTC Collateral focuses on the immediate market need for OTC derivative exposures, all types of bilateral collateral management activity are in scope, including bilateral repo, securities lending and special collateral agreements.
OTC Collateral is also linked to the TradeCycle service for cleared and
un-cleared derivatives Clearstream offers in collaboration with Commerzbank. Commerzbank customers can access Clearstream’s collateral management services via TradeCycle. In turn, TradeCycle gives Clearstream customers access to services via Commerzbank such as OTC clearing, collateral advisory and valuation services.
Stefan Lepp, head of Global Securities Financing and member of the Executive Board of Clearstream, said: “Our bilateral collateral management service OTC Collateral is an important expansion of the Global Liquidity Hub and will strengthen our offering to banks and the buy side in line with the growing demand in the OTC derivative space. Its seamless connection to the tri-party world via a range of reuse possibilities will enable customers to meet all their exposures from a single collateral pool, regardless of whether they are bilateral, tri-party or to a CCP.”
Clearstream Launches Bilateral Collateral Management Service
Clearstream is launching OTC Collateral, a bilateral collateral management service enabling customers to cover over-the-counter, tri-party and CCP exposures from a single collateral pool.
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