DTCC and Euroclear Launch Joint Venture for Collateral Processing

The Depository Trust & Clearing Corporation (DTCC) and Euroclear have officially created the previously planned joint venture, DTCC-Euroclear Global Collateral, a collateral processing service owned equally by the two firms and domiciled in the U.K.

The joint venture will bring to market a Margin Transit Utility (MTU) and Collateral Management Utility (CMU). With the MTU, the joint venture will provide straight-through processing of margin obligation settlement, leveraging current DTCC infrastructure, along with additional infrastructure currently in development in coordination with the industry. Industry testing for this utility is scheduled to begin in mid-2015.

Leveraging Euroclear’s Collateral Highway solution, the CMU will aim to improve collateral allocation and mobility, following the launch of the MTU.

As a whole, DTCC-Euroclear Global Collateral will operate open architecture services to facilitate access to other central securities depositories, custodians and settlement agents.

While the joint venture’s operations are subject to regulatory approvals, the governance will be shared equally between DTCC and Euroclear, with its board and senior executives drawn from the two firms’ management, including Michael Shipton, Euroclear managing director and head of corporate technology, who will assume the role of CEO of DTCC-Euroclear Global Collateral, while Mark Jennis, DTCC’s managing director, strategy and business development, will serves as executive chairman.

In addition to these two appointments, the board will include Euroclear’s Jo Van de Velde, managing director and head of product management; and Mei Li Powell, managing director and head of communications, marketing & CSR; from DTCC will be Peter Axilrod, managing director and head of corporate strategy and business development; and Andrew Douglas, managing director and head of government relations for Europe and Asia.

“The creation of this joint venture company will deliver to our clients increased efficiency and reduced costs within the highly-fragmented and complex collateral management industry,” says Euroclear CEO Tim Howell. “Firms within the post-trade world span multiple countries, if not continents. By drawing on the combined resources and expertise of two of the largest post-trade infrastructure providers in the world, this strategic partnership with DTCC will play a leading role in addressing the challenge of efficiently allocating and mobilizing capital across the globe.”

DTCC President and CEO Michael Bodson adds: “This joint venture reflects DTCC’s and Euroclear’s commitment to delivering global solutions that help safeguard the stability of the financial markets. The company will play a critical role in helping the industry address capital and operational challenges resulting from the vastly increased volume and velocity of margin movements worldwide that are anticipated under regulations promulgated by financial reform legislation such as Dodd-Frank and EMIR (European Market Infrastructure Regulation).”