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Euroclear, DTCC join forces
08 May 2014
Firms seek to change the face of collateral processing
Euroclear and DTCC have agreed to collaborate in order to
create a joint venture with the aim of revolutionising
The proposed venture will result in the launch of new industry
utilities to streamline margin settlement processing and
improve access to collateral globally.
"In bringing together two of the industry's largest post-trade
market infrastructures, we will be addressing sub-optimal
collateral mobility and allocation issues by creating the
biggest open architecture collateral processing ecosystem,
accessible to all market participants across the globe," said
Tim Howell, CEO of Euroclear.
Processing of collateral is becoming increasingly complex as
OTC derivatives are being pushed onto central clearinghouses,
leading to demand for more efficient processes.
"Collateral processing continues to become more complex, with
margin calls expected to rise steeply and the need to
seamlessly integrate collateral and spot market settlements
similarly increasing. Firms are actively looking for global
solutions to solve these issues," said Michael Bodson,
president and CEO, DTCC.
Euroclear and DTCC also expected the venture to improve the
safety of the financial markets.
"By delivering tangible benefits to the industry, we will
improve efficiency and mitigate risks at a time when regulatory
change is expected to significantly increase the volume of
margin calls and securities collateral settlement," Howell
The venture will result in a collateral processing
infrastructure that will incorporate both firms’
abilities and efforts. It will initially focus on creating a
margin transit utility (MTU) to provide straight-through
processing for margin obligations, and will pilot a collateral
management utility (CMU) to address the issue of mobilising
sub-optimal collateral globally.
The MTU will use the DTCC’s development work while
the CMU will leverage Euroclear’s
Once fully operational, the utilities will be integrated to
provide a seamless front-to-back collateral processing
The joint venture is subject to several conditions, including
completion of definitive documentation, final approval from the
boards and receipt of any necessary regulatory approvals.