DTCC-Euroclear service to ease cross-border collateral constraints

DTCC-Euroclear service to ease cross-border collateral constraints

A new service allowing firms to marshal US securities to use as collateral in Europe has been launched by two of the world’s largest central securities depositories (CSDs). 

DTCC and Euroclear announced on Wednesday that the tool, dubbed Inventory Management Service (IMS), is now live. 

The platform, part of the pair's joint venture GlobalCollateral, aims to deliver cross-border collateral mobility.

Shifting collateral across time zones and markets is often a time consuming and costly process. 

Other CSDs, including Euroclear's rival Clearstream, are working on blockchain solutions to ease cross-border collateral burdens.

The introduction of IMS also comes amid rising demand for high-quality securities to back trades.

Both Euroclear and DTCC described the deployment of the service as a "major step" towards creating global collateral linkages.

They added that IMS will help to alleviate the liquidity, regulatory and risk challenges that the industry has been facing.

Higher margin requirements on derivatives trades, for example, are magnifying the focus on whether counterparties have sufficient collateral available. 

With IMS, firms can use Depository Trust Company (DTC) eligible securities in the US, including equities, corporate bonds and asset backed securities, for collateral purposes within Euroclear.                 

“This is a major step for GlobalCollateral," said Michael Shipton, chief executive of GlobalCollateral.

"IMS delivers one of the joint venture’s key objectives – to address what market practitioners have long recognised as a critical need to be able to directly mobilize and use collateral across borders and to move dollar assets into Europe. 

"With IMS, firms have greater control and flexibility in the way they utilize their assets, while benefiting from improved efficiency.”

In December, US regulator the SEC approved Euroclear's application to begin to provide limited clearing services for US equities.

The CSD has acted as a clearing agency for US government securities since 1998. 

Most Popular