Clearstream and South Africa’s central securities depository (CSD) Strate have launched a centralised collateral management service for the South African financial market.
Strate has formed a collateral management industry forum to look into collateral optimisation in the local market, and has now started a collateral management service, which will initially be developed by Clearstream.
The initiative is aimed at helping market participants in their search for high-quality collateral; a key concern following changes to regulation worldwide, including capital adequacy rules under Basel III, and the need to post collateral when centrally clearing OTC derivatives trades under the US’ Dodd-Frank Act and the European market infrastructure regulation.
This adds to South African regulatory obligations under the Pension Funds Act, which points to a re-think of collateralisation in the industry.
“Collateral has become a very scarce resource and sourcing good quality collateral is increasingly expensive,” Stefan Lepp, head of global securities financing and member of the executive board of Clearstream, said.
“The service looks to manage collateral holdings and exposures much more efficiently to provide markets with access to much needed liquidity.”
The new Strate service is part of Clearstream’s collateral management outsourcing solution, which allows partners to manage the collateral of their underlying client base.
The assets will not leave the country and remain under local jurisdiction. The initiative, which launched in 2011, has gained momentum as a result of regulatory changes, according to Clearstream. Brazil and Australia are also taking part in the initiative.