SGX and Clearstream have signed a Letter of Intent on the launch of a collateral management service which enables customers to more easily and efficiently use assets held at SGX's securities depository, CDP, for their collateral needs.
Under the agreement, SGX uses Clearstream's collateral management infrastructure, the Global Liquidity Hub, and offers its Liquidity Hub GO service, to enable collateral to be allocated, optimised and substituted on a fully automated and real-time basis. Singapore's market infrastructure remains strong as the service ensures collateral remains within domestic jurisdiction.
Muthukrishnan Ramaswami, President of SGX, said: "We are pleased to partner with Clearstream in providing our customers a collateral management offering which meets their needs at a time when they are increasingly concerned about risks and regulatory changes. We will also work with Clearstream to expand this offering to other markets in the region. By becoming the first Asian securities depository to offer this service, we strengthen and enhance Singapore's position as a leading financial centre."
Jeffrey Tessler, CEO of Clearstream, said: "We are delighted to expand the Liquidity Hub GO partnership model to Singapore Exchange and to bring our unique collateral management outsourcing solution to Asia. Together with SGX, we will be able to develop a tailor-made collateral management solution for Singapore in a very short time-to-market. High quality collateral is scarce and increasingly expensive - making it available is also a top industry priority in Asia. SGX and Clearstream will soon be able to jointly address this major industry challenge for the Singapore and Asian markets."
Clearstream's Liquidity Hub GO service went live with the Brazilian CSD Cetip in July 2011 and will be launched with ASX, Australia, the South African CSD Strate and Spanish CSD Iberclear in the course of 2013. Canadian CSD CDS has also signed a Letter of Intent with Clearstream.
The initiative has gained momentum as upcoming regulatory changes require financial and non-financial institutions to improve their capital management. Clearstream is the only collateral management services provider with a proven ability to manage collateral across time zones without transferring assets out of the respective domestic environment.