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DTCC and Euroclear to launch joint Collateral service
New Platform Will Help Clients Mitigate Risks and Costs Associated with Collateral Management
Initially, the joint services will offer automatic transfer and segregation of collateral based on agreed margin calls relating to over-the-counter derivatives and other collateralised contracts. This will significantly reduce settlement risk, increase transparency around collateral processing on a global basis and will provide maximum asset protection for all participants. DTCC and Euroclear will also establish mutual links, permitting firms to manage collateral held at both firms' depositories as a single pool.
The joint service will be operated as an industry cooperative and will provide open and non-discriminatory access to all other collateral processing providers, including custodians, CSDs and ICSDs, that wish to link their services to the joint service.
Tim Howell, Chief Executive Officer, of Euroclear said: "As demand for collateral increases, both DTCC and Euroclear are each developing our own means to ease collateral sourcing and mobilisation for clients. Euroclear's global Collateral Highway is a key part of our strategy to deliver such an infrastructure. We are delighted to work with DTCC and its clients to optimise the use of our collateral inventories as part of a new, joint service."
"The industry is focused on collateral management as a result of concerns over how to address operational and counterparty credit risk while navigating the changing regulatory landscape," said Michael Bodson, DTCC's President and CEO. "DTCC's Margin Transit Utility, currently under development, will help mitigate risks, lower costs and create greater efficiencies, by providing straight-through-processing to help satisfy obligations of clients. We look forward to leveraging the strengths of both institutions to meet the collateral needs of industry participants."
DTCC's depository services are offered by The Depository Trust Company, a wholly-owned subsidiary of DTCC.
DTCC has operating facilities and data centers around the world and, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions for thousands of institutions worldwide. With 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry, simplifying the complexities of clearance, settlement, asset servicing, global data management and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, derivatives, money market instruments, syndicated loans, mutual funds, alternative investment products, and insurance transactions. In 2012, DTCC's subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from 131 countries and territories valued at US$37.2 trillion. DTCC's global trade repositories record more than US$500 trillion in gross notional value of transactions made worldwide.
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