Clearstream Signs First Asian CSD for Collateral Management Service

SGX and Clearstream have signed a Letter of Intent on the launch of a collateral management service to help customers more easily and efficiently use assets held at SGX’s securities depository, CDP, for their collateral needs.

Under the agreement, SGX uses Clearstream’s collateral management infrastructure, the Global Liquidity Hub, and offers its Liquidity Hub GO service, to enable collateral to be allocated, optimized and substituted on a fully automated and real-time basis. The white-labeled service ensures collateral remains within domestic jurisdiction and is intended to help financial and non-financial institutions comply with the upcoming regulatory changes requiring them to improve their capital management.

Muthukrishnan Ramaswami, president of SGX, said: “We are pleased to partner with Clearstream in providing our customers a collateral management offering which meets their needs at a time when they are increasingly concerned about risks and regulatory changes. We will also work with Clearstream to expand this offering to other markets in the region. By becoming the first Asian securities depository to offer this service, we strengthen and enhance Singapore’s position as a leading financial center.”

In an April survey at a Clearstream collateral management conference in Singapore, 39% of delegates from the financial industry said their institutions have no access to a collateral optimization system, and 93% placed a high priority on identifying the right right type of collateral.

“Through the many discussions we had across Asia it became obvious that collateral management has now also become a major priority in this region,” said Stefan Lepp, head of global securities financing and member of the executive board of Clearstream. “As markets are fragmented the challenge was to find a local partner with regional ambitions to be able to develop, over time, a truly pan-Asian collateral management solution, as part of our Global Liquidity Hub.”

Jeffrey Tessler, CEO of Clearstream, added: “We are delighted to expand the Liquidity Hub GO partnership model to Singapore Exchange and to bring our unique collateral management outsourcing solution to Asia. Together with SGX, we will be able to develop a tailor-made collateral management solution for Singapore in a very short time-to-market. High quality collateral is scarce and increasingly expensive – making it available is also a top industry priority in Asia. SGX and Clearstream will soon be able to jointly address this major industry challenge for the Singapore and Asian markets.”