Clearstream is rolling out OTC Collateral, a bilateral collateral management service which will significantly strengthen the over-the-counter (OTC) processing capabilities of the Global Liquidity Hub, the company's integrated risk and liquidity management solution.
The full lifecycle of bilateral collateral management activity will now be supported via the Global Liquidity Hub, from Credit Support Annex (CSA) review and administration, mark-to-market, margining, dispute management and portfolio reconciliation to payment and settlement follow-up and reporting.
OTC Collateral will help customers overcome collateral fragmentation and optimise allocation by enabling them to cover over-the-counter, triparty and central counterparty (CCP) exposures from a single collateral pool. This unique optimisation opportunity will be especially useful for derivative exposures, as customers are currently facing the challenge of managing two parallel streams of exposures for cleared and uncleared collateral trades.
The new bilateral OTC Collateral service is complimentary to the already existing triparty offering, as collateral received from bilateral transactions can be readily reused within the triparty environment. While OTC Collateral focuses on the immediate market need for OTC derivative exposures, all types of bilateral collateral management activity are in scope, including bilateral repo, securities lending and special collateral agreements.
The bilateral collateral management service fits in with other Global Liquidity Hub services - reuse to the triparty world will be facilitated as an integral part of the offering. As the custody of security collateral will be in Clearstream, customers will also have full access to Clearstream's renowned custody and asset servicing product suite.
OTC Collateral is also linked to the TradeCycle service for cleared and uncleared derivatives Clearstream offers in collaboration with Commerzbank. Clearstream's triparty collateral management services and the bilateral service OTC Collateral are part of the TradeCycle product suite.
Stefan Lepp, Head of Global Securities Financing and member of the Executive Board of Clearstream, said: "Our bilateral collateral management service OTC Collateral is an important expansion of the Global Liquidity Hub and will strengthen our offering to banks and the buyside in line with the growing demand in the OTC derivative space. Its seamless connection to the triparty world via a range of reuse possibilities will enable customers to meet all their exposures from a single collateral pool, regardless of whether they are bilateral, triparty or to a CCP."