Iberclear, the Spanish central securities depository (CSD), and Clearstream have signed an agreement to develop a new tri-party collateral management service for the Spanish market.
The service will target the collateralisation of exposures in the Spanish market held by Iberclear clients and will initially cover exposures resulting from domestic repo transactions, including the possibility of pledging received assets from a repo transaction with the Banco de España as a means of accessing central bank money.
The joint solution will be launched ahead of a multitude of regulatory changes that will require financial and non-financial institutions to improve their liquidity and collateral management efficiency. Under the new rules, implemented through the European market infrastructure regulation, market participants will need to hold collateral against centrally-cleared OTC derivatives trades that were previous transacted bilaterally.
Iberclear is the first European post-trade services provider that will outsource the allocation, optimisation and substitution of domestic collateral to Clearstream’s Global Liquidity Hub collateral management platform. Through the Liquidity Hub GO (Global Outsourcing) service, Iberclear clients can handle their domestic collateral holdings and exposures more efficiently while keeping them in the domestic Spanish environment. Jeffrey Tessler, CEO Clearstream, said: “It’s a strategic priority of Deutsche Börse Group to make global markets more robust through risk and liquidity management solutions such as Clearstream’s collateral management outsourcing service. Collateral has become a very scarce resource and sourcing good quality collateral is increasingly expensive – we can help managing collateral holdings and exposures much more efficiently.”
Iberclear will build on this initiative to broaden its range of custody services. The management of collateral will also cover international securities, furthering in this ways its efforts to become the Spanish firm’s provider of choice for national and international custody services.
José Massa, chairman of Iberclear, said: “We have a strong and very productive commercial relationship with Clearstream and we are pleased to continue developing new initiatives in partnership. We are sure the new service jointly developed with our partner will satisfactorily meet the demands of our clients, who in the current environment need, more than ever, tools to securely and efficiently handle their collateral. The service is a major step forward for Iberclear and the Spanish market as it will allow our clients to manage their collateral holdings and exposure more efficiently without moving it out of Spain.”
Clearstream’s Liquidity Hub GO service went live with the Brazilian CSD Cetip in July 2011. Since then Clearstream has entered into agreements with the Australian Securities Exchange (August 2011), the South African CSD Strate (January 2012) and the Canadian CSD CDS (March 2012) to develop outsourced collateral management services.
Reporting by Janet du Chenne, Global Custodian, an Asset International publication