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Euroclear opens up collateral borders
09 July 2012
Euroclear is to introduce an infrastructure to move collateral across silos
Euroclear is creating an infrastructure to find and move securities across borders in order to serve as collateral.
The ‘Collateral Highway’ is aimed at boosting flows of collateral which is used for access to central bank liquidity, repos and securities lending, as well as margins for central counterparties (CCPs) and bi-laterally cleared OTC derivative trades.
There is a lot of focus on collateral management across borders and on collateral optimisation due to new regulations and the liquidity crisis, said Saheed Awan, global head of collateral management services at Euroclear.
He explained that collateral management can be problematic because securities to be used as collateral are often locked in a particular market, entity or time zone. This then lowers the efficiency of collateral management or optimisation for cross-border collateral purposes.
A Euroclear spokeperson did not give a launch date for the highway but said some of its parts are in place already. He added that there is still work to be done to attract more entities to become part of the new network in order to maximise its market contribution.
Euroclear’s new facility will have multiple collateral entry and exit points and is open to all CCPs, central securities depositaries (CSDs), central banks, global and local custodians, investment and commercial banks. Custodians, agent banks and CSDs which don’t have a collateral management service offering will be able to use the highway as their own for their domestic clients.
Euroclear has developed Open Inventory Sourcing technology to keep track of the collateral positions deposited by clients in various locations.