Euroclear & DTCC look to break new ground with collateral processing joint venture
Proposed joint venture between two of the industry's largest post-trade market infrastructures to launch new industry utilities to streamline margin settlement processes and enhance access to collateral worldwide, improving the safety and soundness of the financial markets
Brussels/London/New York – May 6, 2014 – The Boards of Euroclear and The Depository Trust & Clearing Corporation (DTCC) have authorized their respective companies to finalize negotiations to establish a joint venture (JV) to deliver a collateral processing infrastructure that leverages and integrates both companies’ capabilities and efforts to date. Both Euroclear and DTCC are industry owned and governed, and the firms will collaborate with market participants as solutions are developed.
The JV will initially focus on launching a Margin Transit Utility (MTU) that will provide straight through processing to the settlement of margin obligations, and on piloting a Collateral Management Utility (CMU) to address the pressing problem of sub-optimal collateral mobility and allocation at a global level. The MTU service has already received significant interest from the industry. The MTU will leverage development work being undertaken by DTCC and the CMU pilot will leverage current Euroclear technology. When fully operational, the utilities will be integrated to provide a seamless front-to-back collateral processing platform.
The JV will operate open architecture services, where DTCC’s and Euroclear’s settlement platforms represent two of many linked settlement locations. The intention is to extend access to other interested settlement platforms such as central securities depositories, custodians and settlement agents.
Tim Howell, Chief Executive Officer of Euroclear, said: "We are delighted to be partnering with DTCC on this important evolution of the post-trade industry. In bringing together two of the industry's largest post-trade market infrastructures, we will be addressing sub-optimal collateral mobility and allocation issues by creating the biggest open architecture collateral processing ecosystem, accessible to all market participants across the globe. By delivering tangible benefits to the industry, we will improve efficiency and mitigate risks at a time when regulatory change is expected to significantly increase the volume of margin calls and securities collateral settlement."
“As two industry owned and governed infrastructure providers, Euroclear and DTCC share a similar mission focused on supporting the efficiency of markets, maintaining market stability and reducing systemic risk while delivering shared economies of scale,” stated Michael C. Bodson, President & CEO of DTCC. “Collateral processing continues to become more complex, with margin calls expected to rise steeply and the need to seamlessly integrate collateral and spot market settlements similarly increasing. Firms are actively looking for global solutions to solve these issues. We look forward to working with Euroclear and the industry to drive operational improvement, streamlined access to collateral and reduced risk in the years to come.”
Consummation of the joint venture is subject to several conditions, including completion of definitive documentation, final approval from the Boards and receipt of any necessary regulatory approvals.
Note to editors
With over 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 15 countries, DTCC, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers worldwide.
User owned and industry governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to the financial markets.
In 2013, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from 139 countries and territories valued at US$43 trillion. DTCC’s global trade repository processes tens of millions of submissions per week.
Euroclear is one of the world's largest providers of domestic and cross-border settlement and related services for bond, equity, ETF and other mutual fund transactions with offices in 15 countries across the globe and links to 46 international markets.
Euroclear is a proven, resilient capital market infrastructure committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise which includes over 100 central banks and supranationals.
The Euroclear group includes Euroclear Bank, which is consistently rated AA+ by Fitch Ratings and AA by Standard & Poor's, as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & Ireland. The group settled the equivalent of $789 trillion (€572 trillion) in securities transactions in 2013 representing 170 million domestic and cross-border transactions, and held over $33.3 trillion (€24.2 trillion) in assets for clients.