- Canada looks to join Brazil, Australia and South Africa in the use of Clearstream's Liquidity Hub GO (Global Outsourcing)
- Exclusive talks to develop a triparty collateral management service for Canada
- CDS clients to gain by using collateral more effectively
LUXEMBOURG and TORONTO, March 12, 2012 /CNW Telbec/ - Canadian financial institutions look set to benefit from a new efficient and effective collateral management service planned for development by Clearstream and CDS Clearing and Depository Services Inc. The two companies signed a letter of intent on 1 March 2012 and will now move forward in exploring the creation of a new triparty collateral management service for Canada. The service would enable Canadian market participants to meet demands for collateral in the most cost effective and operationally efficient way possible: CDS, the Canadian central securities depository, would utilise Clearstream's collateral management infrastructure and the Liquidity Hub GO service to allocate, optimise and substitute domestically held collateral on a fully automated basis and in real time.
Liquidity Hub GO for Canada would reduce operational risks and costs as well as minimize the opportunity cost associated with collateral fragmentation. CDS clients would be able to handle their collateral needs more strategically. Collateral would remain in the domestic market. Clearstream is the only collateral management services provider which can manage collateral across time zones and regions while enabling the assets to remain in the respective domestic market and under local legislation.
Jeffrey Tessler, CEO Clearstream, noted that this latest announcement signalled the fourth strategic partnership in the collateral management outsourcing space. "It confirms the validity of our Liquidity Hub GO strategy in supporting market infrastructures across the globe with a state-of-the-art collateral management solution," he said. "Clearstream is committed to continue forging strategic links which help the customers of our strategic partners to better utilise their scarce collateral including access to our global liquidity pool which is building further links to a growing central counterparty (CCP) network and which is enabling customers to gain from greater central bank money access on a global basis. We are delighted to work with CDS to examine the development of a collateral management service for Canada."
Ian A. Gilhooley, president and CEO of CDS, said: "Collateral management efficiency and effectiveness will be critical in a future world where global demand for eligible collateral is expected to increase exponentially. This new partnership is a logical choice to enable CDS to provide a triparty collateral management service in Canada. We intend to leverage the functionality of our securities depository with existing, best-practice tools provided by Clearstream's Liquidity Hub GO service. Our end vision is that a Canadian participant will be able, efficiently and effectively, to meet any demand for collateral, using collateral that is held anywhere in the world. We believe that this will become a very powerful capability in the new environment that we see developing."
Clearstream's Liquidity Hub GO service went live with Brazilian CSD Cetip in July 2011 and is now successfully providing collateral management services that cover Brazilian domestic OTC derivative exposures. Since then further development plans have been announced between Clearstream and the Australian Securities Exchange (August 2011) and South African CSD Strate (January 2012). The initiative has gained momentum as upcoming regulatory changes arising from the Basel III framework require financial and non-financial institutions to improve their liquidity management and, accordingly, their collateral management efficiency.
The recently published Accenture/Clearstream report "Collateral Management: Unlocking the Potential in Collateral" revealed that the financial services sector could save more than 4 billion Euros annually in collateral management costs by addressing operational inefficiencies.
Clearstream is the leading service provider in liquidity and collateral management services in Europe with more than 20 years of experience in this field. Clearstream provides integrated collateral management services for margining, including auto allocation, optimization and auto substitution of collateral across time zones and for a wide range of market players, i.e. stock exchanges, clearing houses, central securities depositories, central banks, commercial banks, private banks, asset managers, insurance companies and an ever growing number of corporates.
As an international central securities depository (ICSD) headquartered in Luxembourg, Clearstream provides the post-trade infrastructure for the Eurobond market and services for securities from 52 domestic markets worldwide. Clearstream's customers comprise approximately 2,500 financial institutions in more than 110 countries. Its services include the issuance, settlement and custody of securities, as well as investment fund services and global securities financing. With almost 11 trillion Euros in assets under custody, Clearstream is one of the world's largest settlement and custody firms for domestic and international securities.
As a central securities depository (CSD) based in Frankfurt, Clearstream also provides the post-trade infrastructure for the German securities industry, offering access to a growing number of markets in Europe.
Further information: www.clearstream.com
About CDS Clearing and Depository Services Inc.
CDS Clearing and Depository Services Inc. (CDS) is Canada's national securities depository, clearing and settlement hub - supporting Canada's equity, fixed income and money markets, holding almost CAD 4 trillion on deposit and handling over 413 million domestic security trades annually. CDS also settles almost 55 million cross-border transactions with the U.S. annually and has custodial relationships with the Depository Trust Company (DTC), Euroclear France, JASDEC and Skandinaviska Enskilda Banken AB (SEB).
CDS's ongoing commitment to minimize risk for market participants and its sophisticated financial risk model have earned it a top global ranking from Thomas Murray, the specialist custody rating, risk management and research firm.
CDS is a subsidiary of The Canadian Depository for Securities Limited - a valued partner to securities market participants, providing reliable, cost-effective depository, clearing, settlement, regulatory and information services. CDS delivers innovative, value-added solutions that help stakeholders maintain a competitive capital market in Canada and build a strategic global advantage.
Further information: www.cds.ca
For further information:
Media contact Clearstream
Nicolas Nonnenmacher, +352-243-36115
Media contact CDS
Janet Comeau, +1 416-365-8427