SIX partners with CME in Europe for tri-party collateral management

European post-trade group SIX Securities Services and OTC derivatives clearing house CME Clearing Europe have signed an agreement to provide a European market infrastructure regulation-compliant (EMIR) collateral platform for banks and buy-side clients. 

The platform will enable these market participants to provide collateral directly to a CME Clearing Europe account at the SIX central securities depository (CSD) to meet margin requirements, in order to provide better risk mitigation, transparency and performance for OTC derivatives trading.

Subject to regulatory approval, this offering will initially be available to a number of global insurance firms based in Switzerland, but will eventually be rolled out to other markets and buy-side institutions. With EMIR mandating the centralized clearing of OTC derivatives, buy-side firms will have increased collateral management requirements and will ideally want their collateral to be held in a single location.

Users of the new the new tri-party collateral platform will have a 360° view of how their collateral is being utilized at any given time, as well as providing automated collateral segregation for enhanced compliance and risk control. The collaboration will give CME CE’s clients access to SIX Securities Services’ virtual liquidity pool and collateral mobilization capabilities, eliminating the inefficiencies of having to transfer securities across disparate systems.

Lee Betsill, CEO, CME Clearing Europe says the collaboration provides clients with an enhanced level of collateral protection. “It allows clients to optimize the use of their existing pool of securities held with SIX SIS for their clearing needs in real time whilst keeping them in Switzerland.”

BayernInvest will be Germany’s first investment company to partner with CME Clearing Europe. Oliver Decker, legal counsel, says: “Full segregation ensures bankruptcy remoteness, which is an advanced structure that makes a real difference to us.”

Daniel Berner, head portfolio management, Swiss Life, states: “This new partnership between CME Clearing Europe and SIX Securities Services makes headway for clients aiming to mitigate the credit risk in connection with the transfer of large initial margin amounts. This is crucial for Swiss insurers who have to comply with strict regulatory rules for the safekeeping of policyholder funds.”

Thomas Zeeb, CEO, SIX Securities Services, comments: “The agreement with CME Clearing Europe is another milestone in our push for innovation and collaborative competition in European clearing. The partnership is part of our wider internationalization strategy following on from the acquisition of Oslo Clearing, along with our support for interoperability.”