Clearstream Seeks Partners For Global Offshore RMB Market Approach

Clearstream is seeking to partner with securities industry participants to offer securities services to foreign investors seeking to access the Renminbi market.
By Janet Du Chenne(59204)
Clearstream is seeking to partner with securities industry participants to offer securities services to foreign investors seeking to access the Renminbi market.

Services and products to be explored include triparty repo solutions for increasing interbank market liquidity in the RMB, cash management, bonds issuance and the development of new offshore products and services including in the funds area.

As part of its Asia strategy, where Clearstream saw 20% revenue growth in its ICSD business in 2013, the company is pursuing a market approach to bring together market providers and participants from across the finance community to collectively enable foreign investors to further invest in the Chinese currency, help develop solutions to increase offshore RMB liquidity, enhance the depth and breadth of RMB products and services and facilitate both growth and maturity in the offshore RMB bond markets.

To deliver this market approach, Clearstream is actively seeking partners to join in building and implementing the components that will help establish and facilitate an international offshore RMB market. As part of its market approach, Clearstream also itself intends to leverage its international infrastructure to act as a reciprocal gateway between Chinese and non-Chinese investors and issuers and other market participants.

Clearstream will capitalize on its existing global infrastructure and post trade services as well as build partnerships with key players and providers in the global Offshore Renminbi market to better connect the international community and facilitate the evolution of a more efficient and optimized market, says Denis Noonan, vice president, product management, Clearstream.

“Maximizing the liquidity of the offshore Renminbi supply is key to the evolution of the Renminbi as an international currency. We will utilize our core settlement and custody services as well as our collateral management capabilities in new and innovative ways to link participants across multiple global regions and enhance Offshore Renminbi liquidity to. The approach will see us working with other banks, CSDs and global custodians to collectively promote the internationalization of the RMB and development of related international services and products”

Noonan describes the offhsore RMB market as a young and evolving market, but unique due to its size. “Any emerging market needs a process to evolve and build the more complex tools required for the market to grow. But while this is an emerging market, it is also the second largest economy in the world. The supply of Offshore RMB is a relatively small and fixed amount and it will continue to be so until regulations on the currency are further relaxed. Our vision is to pre-empt the challenges of this unique and developing market- and to develop and provide solutions to them – for achieving a fully internationalized Renminbi market.”

Clearstream is working with several specific partners on its market approach for the Renminbi market. “It’s good to have competition but what is more important is how we can make the whole pie for everyone bigger in a centralized, consolidated market and having everyone integrated and with interoperating synergies to help the market emerge more efficiently.”

As an example, the market infrastructure provider is currently working with the Hong Kong Monetary Authority (HKMA) to allow HKMA account holders of excess RMB in Hong Kong to use Clearstream’s collateral management system to provide their RMB liquidity to Clearstream’s customers who are demanding that RMB.

“If local providers have an agreement with Clearstream to enable them to lend their RMB in a collateralized way, it gives their customers deeper access to a wider liquidity pool,” says Noonan. “It’s about connecting the supply and demand for Offshore Renminbi across markets and geographies. There is excess supply and demand for Offshore Renminbi among the biggest market players. The key to optimizing Offshore Renminbi liquidity is connecting these players with a proven and efficient collateralized funding platform, and we provide that platform.”

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