Multi-asset clearing house CME Clearing Europe has selected investment management services provider BNY Mellon to offer a tri-party collateral service to its members.
Based on BNY Mellon’s MarginEdge service for listed, OTC and bilateral OTC derivatives, the initiative will give clients, clearing members and clearing houses a real-time view of their collateral exposures.
After CME Clearing Europe obtains regulatory approval of its new tri-party agreement, clearing members will have the ability to manage collateral via BNY Mellon.
The service addresses the more stringent regulatory requirements on the use of collateral for OTC derivatives, effected in Europe through the European market infrastructure regulation (EMIR). The rules will push OTC derivatives that can be standardised into central clearing with the aim of reducing the systemic risk associated with this market.
“Financial institutions are facing enormous challenges brought about by the EMIR and Dodd-Frank regulatory schemes and rapidly evolving regulatory structure in Europe and the US,” said James Malgieri, executive vice-president, global collateral services, BNY Mellon. “Collateral is a critical part of the risk mitigation framework of these new regulations. However, it brings its own challenges around selection, valuation and time-sensitive collateral delivery. BNY Mellon has for many years provided tri-party collateral management services for traditional repo transactions and has continued to evolve our model to meet changing requirements in the new CCP environment.”
“We feel that flexibility and certainty in collateral arrangements are necessary for all parties and that BNY Mellon’s tri-party collateral management service offers those elements,” said Andrew Lamb, CEO of CME Clearing Europe.