Clearstream has decided to broaden the distribution of the securities its clients have to lend by working with two of its major clients – Citigroup and UBS – as distributors.
“This new ASLplus service complements the existing array of services Clearstream delivers in order to bring efficiency, innovation and service excellence to the market,” says Volker Pothoff, Managing Director, Clearstream Banking. “The revenue-enhancing element of ASLplus is of real interest to lending participant.”
The aim of the so-called ASLplus service is to enable lenders of securities to increase the revenues they receive from their portfolios by introducing Clearstream as the principal and single borrower, so gaining access to the the UBS and Citigroup borrowing clientele at lower risk. The service will be available from next month.
Clearstream says lenders will benefit from waived custody fees on lent positions. They will also be able to earn additional income on their portfolio through the introduction of negotiated securities lending rates. Borrowers, on the other hand, will have readier access to a large pool of fixed income liquidity.
Clearstream will act as collateral agent, ensuring all loans are fully collateralised and monitored daily. Clearstream’s Triparty Collateral Management Services will automatically select and collateralize all ASLplus loans and further allow multiple substitutions and daily margining. Small size positions will be consolidated to make a larger more lendable size for the market combined with lower rates for fails lending. Lenders will have to make only one agreement to secure credit line against Clearstream, so making it easier to access the wider market.
ASLplus is an extension to Clearstream’s Automated Securities Lending (ASL) fails lending programme. The new service was announced at Clearstream’s 10th annual Global Securities Financing Summit which is a dedicated industry conference focused on the European Repo market.
Tim Douglas, Head of Securities Lending at Global Transaction Services at Citigroup says the agreement “shows how Citigroup works with industry participants to enhance liquidity.” Richard Hochreutiner, Managing Director of UBS Investment Bank and Head of Collateral Trading and Sales at the bank in Zurich says he expects to “use our wide distribution capabilities to generate increased revenues for the customers of Clearstream.”