Clearstreams Liquidity Hub 1 st Global Securities Financing - PowerPoint PPT Presentation

Clearstream’s Liquidity Hub 1 st Global Securities Financing Conference Asia

Clearstream, 28 April 2010 Clearstream’s Liquidity Hub n The launch of the Liquidity Hub n Access to Central Bank Liquidity n Enhancing Liquidity n Secured Financing : The way forward n Clearstream’s Liquidity Hub in Asia 2

The launch of the Liquidity Hub Automated Securities Lending - ASL

Clearstream, 28 April 2010 The launch of the Liquidity Hub Automated securities lending - ASL 2. Automatic identification 1. Automatic detection of loan requirement to cover of loan supply from ASL lender(s) a failed trade ASL ASL n Lending agent borrower lender(s) n Collateral agent n Guarantor 5. Securities and 3. Collateral blocked collateral marked and pledged daily directly in favour of 4. Anonymous transfer the guarantor of loan securities to the ASL borrower Securities lending and borrowing for settlement purposes (since 1979) 4

The launch of the Liquidity Hub Triparty Repo Service

Clearstream, 28 April 2010 The launch of the Liquidity Hub Triparty repo - How does it work ? Cash Cash taker provider Clearstream as triparty agent Securities valuation and eligibility check Automatic selection of securities Settlement delivery versus payment (DVP) Securities Cash Daily mark-to-market and reporting DVP settlement Cash Cash taker provider collateral source account account The ease of an unsecured deposit with the security of a repo (since 1992) 6

Clearstream, 28 April 2010 Triparty Repo: re-use of collateral Collateral givers (cash takers) Private banker Receive collateral Give collateral Commercial bank Collat receipt a/c Underlying client Underlying fund Collat receipt a/c Investment Underlying entity bank Collat receipt a/c Central “pivot” a/c (transit) Custodian Reuse on pledge or transfer of title basis Unlimited collateral re-use in the triparty umbrella (since 2006) 7

Clearstream, 28 April 2010 The launch of the Liquidity Hub Triparty Repo: risk management - documentation Collateral Collateral Central bank(s) receiver & giver receiver & giver CMSA CMSA CMSA Custodian Clearstream CCPs Collateral giver bank as agent TBA CMSA CMSA CMSA Collateral Collateral Collateral giver receiver receiver & giver A new generic multi-lateral service agreement, the collateral management service agreement (CMSA) (since 2006) 8

Clearstream, 28 April 2010 The launch of the Liquidity Hub Triparty Repo: risk management - eligibility “Baskets” pre-defined in Appendix A “Counterparty acceptance list and collateral n eligibility criteria” to the CMSA Type of issuer n Government and sovereign n Supranational n Agency n Corporate n Structured securities n Eligible securities’ currency denominations n Fixed income credit ratings n Haircuts (same currency, cross currency, dynamic) n Remaining time to maturity n Concentration criteria n 9 9

Clearstream, 28 April 2010 The launch of the Liquidity Hub Triparty Repo: risk management - eligibility Securities quotation age per asset class Concentration by country, asset class and structured securities More sophisticated criteria to avoid concentration risk and ensure diversification (since 2006) 10

Clearstream, 28 April 2010 Clearstream’s Liquidity Hub Voting Question What is the biggest hurdle in setting up a Triparty Repo operation ? Legal and contractual 1. Operational set up and development 2. Market practice 3. 11

Access to Central Bank Liquidity Triparty Collateral Management Service

Clearstream, 28 April 2010 Access to Central Bank Liquidity Triparty Collateral Management Service Deutsche BundesBank (BUBA – EUR) Federal Reserve Triparty Commercial Bank of New York Collateral Banks (FRBNY- USD) Management Banque Centrale Others Bank of England de Luxembourg Central Banks (BoE – GBP) (BCL – EUR) (various currencies) 13

Clearstream, 28 April 2010 Access to Central Bank Liquidity Triparty Collateral Management Service n Bundesbank pledge Deutsche Bundesbank n Collateral pooling n AT,BE,DE,IT,FR,XS,NL,LU n Auto-allocation and subs Euro GC Pooling n Collateral optimisation CmaX Xemac n Mark-to-market Clearstream Clearstream Eurex clearing n Reporting Frankfurt Luxembourg margining n Direct link to international securities from CBL via CmaX. Other bilateral exposures Collateral management for the Eurosystem (BuBa model since 1999) 14

Clearstream, 28 April 2010 Access to Central Bank Liquidity Triparty Collateral Management Service Collateral FED of NY giver Clearstream as collateral agent Securities valuation and eligibility check Automatic selection of securities USD for Settlement free of payment (FOP) Securities DW, TAF Discount window eligibility criteria including non-US assets FOP settlement FED Collateral Collateral giver Collateral account in source giver in NY CBL account Collateral management for the discount window (since 2000) 15

Clearstream, 28 April 2010 Access to Central Bank Liquidity Triparty Collateral Management Service: Two concrete examples Example 1: Access to the EUR The foreign branch delivers collateral to their German / Luxembourg entity in order to pledge this to German Bundesbank / Banque Centrale de Luxembourg Collateral Bundesbank from German / Lux Triparty BcL Pledge Xemac / CmaX foreign branch branch Collateral Mgmt pledge Example 2: Access to the USD Collateral received in Triparty Repo is re-used with the Fed Cash Provider Fed pledge Fed NY Triparty Repo Cash Taker account in CBL Triparty Participation in Account in CBL Triparty Repo TAF, Disc Collateral Mgmt Window… A simple yet unique liquidity solution during the credit crisis 16

Enhancing Liquidity Securities Lending Service - ASLplus

Clearstream, 28 April 2010 Enhancing liquidity Securities lending service - ASLplus 1. Requests for selected 2. Automatic identification securities for borrowing of loan supply from by CBL as sole ASLplus lender(s) borrower CBL as ASLplus principal lender(s) Clearstream Intl. borrower Collateral agent 5. Securities and 3. Eligible collateral collateral identified and marked daily pledged in favour of the lenders 4. Transfer of loan securities to CBL as sole borrower Securities lending and borrowing for selected securities (2006) 18

Secured Financing : The way forward Euro GC Pooling - EGCP

Clearstream, 28 April 2010 Secured Financing: The way forward Euro GC Pooling - EGCP § Anonymous trading § Zero capital cost due to Trading Eurex repo CCP (Eurex Clearing AG) § ECB baskets § Standard basket: fully Clearing re-usable for pledging with Eurex clearing (CCP) Bundesbank § Linking of CBL and CBF Euro GC Pooling Clearstream participant collateral, creating one Collateral management virtual collateral pool / settlement / § Full STP, Eurex repo / custody Cmax / Xemac Eurex clearing / Clearstream collateral Luxembourg / Frankfurt management and settlement services A unique combination, providing one of the safest investments through CB Liquidity Hub (since 2005) 20

Clearstream, 28 April 2010 Clearstream’s Liquidity Hub Voting Question What do you expect the most from a Triparty collateral agent ? To constantly develop and invest in a sophisticated and flexible collateral management 1. system. To assist in finding and setting up new trading relationships. 2. To ensure eligibilty criteria are respected and collateral is secured. 3. 21

Clearstream’s Liquidity Hub in Asia Global Securities Financing Solutions in Asia

Clearstream, 28 April 2010 Clearstream’s Liquidity Hub in Asia Global Securities Financing Solutions in Asia n Access new counterparties in the APAC region. n Make use of a wider collateral pool in the Asia region. n Leverage the benefits of our leading collateral management products. Triparty Repo – a unique risk/return mix for secured sameday cash lending in n JPY, HKD, SGD, AUD Triparty Securities Lending – a flexible solution for securing loan exposures n Triparty Collateral Management – an efficient means of collateralizing all types n of exposures, including OTC derivates margining and central bank discount window borrowing/payment facilities. 23

Clearstream, 28 April 2010 Clearstream’s Liquidity Hub Voting Question What type of exposure is most worthwhile securing via a Triparty collateral agent ? Cash (Reverse repo). 1. Securities loans (securities lending). 2. Derivatives/margining. 3. Central Bank discount window borrowing 4. 24

Clearstream, 28 April 2010 Clearstream’s Liquidity Hub in Asia Same Day Triparty Repo Notification Deadlines in Asian Markets Currencies Securities Allocation Securities Securities Allocation(SD-1) Allocation(SD) Manual AutoAssign “Manual” AutoAssign USD, MXN 17:00 17:00 16:00 17:00 EUR, GBP, CAD, UYU 17:00 17:00 12:00 14:30 CHF, NOK, SEK, EEK 17:00 17:00 12:00 12:00 DKK 17:00 17:00 10:30 10:30 JPY 17:00 17:00 04:30 (10:30)* 04:30 (10:30)* AUD 17:00 17:00 05:00 (11:00)* 05:00 (11:00)* SGD HKD 17:00 17:00 07:00 (13:00)* 07:00 (13:00)* CZK, SKK, ILS 17:00 17:00 N/A N/A NZD,KWD,PHP,THB, MYR, ROL,XAU 12:00 14:00 N/A N/A *(HongKong / Singapore timezone) 25