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

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

Clearstream, 28 April 2010 2

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

The launch of the Liquidity Hub Automated Securities Lending - ASL

Clearstream, 28 April 2010 4

The launch of the Liquidity Hub

Automated securities lending - ASL

2. Automatic identification

• f loan supply from

ASL lender(s)

• 1. Automatic detection of

loan requirement to cover a failed trade

• 3. Collateral blocked

and pledged directly in favour of the guarantor

• 5. Securities and

collateral marked daily

• 4. Anonymous transfer
• f loan securities to

the ASL borrower

ASL borrower ASL lender(s)

n Lending agent n Collateral agent n Guarantor

Securities lending and borrowing for settlement purposes (since 1979)

The launch of the Liquidity Hub Triparty Repo Service

Clearstream, 28 April 2010 6

Cash taker Cash provider

Clearstream as triparty agent Securities valuation and eligibility check Automatic selection of securities Settlement delivery versus payment (DVP) Daily mark-to-market and reporting

Cash provider collateral account Cash taker source account Securities Cash

DVP settlement

The launch of the Liquidity Hub

Triparty repo - How does it work ?

The ease of an unsecured deposit with the security of a repo (since 1992)

Clearstream, 28 April 2010 7

Underlying client Central “pivot” a/c (transit) Collat receipt a/c

Investment bank

Collateral givers (cash takers) Reuse

• n pledge or

transfer of title basis

Custodian

Collat receipt a/c Collat receipt a/c Underlying fund Underlying entity

Commercial bank

Private banker

Triparty Repo: re-use of collateral

Unlimited collateral re-use in the triparty umbrella (since 2006)

Receive collateral Give collateral

Clearstream, 28 April 2010 8

The launch of the Liquidity Hub

Triparty Repo: risk management - documentation

A new generic multi-lateral service agreement, the collateral management service agreement (CMSA) (since 2006) Custodian bank Collateral receiver & giver Collateral giver Central bank(s) Collateral receiver

Clearstream as agent

CCPs Collateral receiver & giver Collateral receiver & giver

CMSA CMSA CMSA CMSA CMSA CMSA

Collateral giver

TBA

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The launch of the Liquidity Hub

Triparty Repo: risk management - eligibility

n

“Baskets” pre-defined in Appendix A “Counterparty acceptance list and collateral eligibility criteria” to the CMSA

n

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

Clearstream, 28 April 2010 10

The launch of the Liquidity Hub

Triparty Repo: risk management - eligibility

More sophisticated criteria to avoid concentration risk and ensure diversification (since 2006)

Securities quotation age per asset class Concentration by country, asset class and structured securities

Clearstream, 28 April 2010 11

Clearstream’s Liquidity Hub

Voting Question What is the biggest hurdle in setting up a Triparty Repo operation ?

1.

Legal and contractual

2.

Operational set up and development

3.

Market practice

Access to Central Bank Liquidity Triparty Collateral Management Service

Clearstream, 28 April 2010 13

Access to Central Bank Liquidity

Triparty Collateral Management Service

Deutsche BundesBank (BUBA – EUR) Others Central Banks

(various currencies)

Triparty Collateral Management Federal Reserve Bank of New York (FRBNY- USD) Commercial Banks Banque Centrale de Luxembourg (BCL – EUR) Bank of England (BoE – GBP)

Clearstream, 28 April 2010 14

Access to Central Bank Liquidity

Triparty Collateral Management Service

n Bundesbank pledge n Collateral pooling n AT,BE,DE,IT,FR,XS,NL,LU n Auto-allocation and subs n Collateral optimisation n Mark-to-market n Reporting n Direct link to international

securities from CBL via CmaX.

Collateral management for the Eurosystem (BuBa model since 1999)

Deutsche Bundesbank Euro GC Pooling Eurex clearing margining Other bilateral exposures Xemac

Clearstream Frankfurt

CmaX

Clearstream Luxembourg

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Collateral giver FED of NY Clearstream as collateral agent Securities valuation and eligibility check Automatic selection of securities Settlement free of payment (FOP) Discount window eligibility criteria including non-US assets FED Collateral account in CBL Collateral giver source account Securities FOP settlement USD for DW, TAF Collateral giver in NY

Access to Central Bank Liquidity

Triparty Collateral Management Service

Collateral management for the discount window (since 2000)

Clearstream, 28 April 2010 16

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 Example 2: Access to the USD Collateral received in Triparty Repo is re-used with the Fed

Cash Taker

Bundesbank BcL pledge

Fed pledge account in CBL

Xemac / CmaX Triparty Collateral Mgmt German / Lux branch Collateral from foreign branch Triparty Repo

Cash Provider Triparty Repo Account in CBL

Triparty Collateral Mgmt

Fed NY

Participation in TAF, Disc Window… Pledge

A simple yet unique liquidity solution during the credit crisis

Enhancing Liquidity Securities Lending Service - ASLplus

Clearstream, 28 April 2010 18

Enhancing liquidity

Securities lending service - ASLplus

• 2. Automatic identification
• f loan supply from

ASLplus lender(s)

• 1. Requests for selected

securities for borrowing by CBL as sole borrower

• 3. Eligible collateral

identified and pledged in favour

• f the lenders
• 5. Securities and

collateral marked daily

• 4. Transfer of loan

securities to CBL as sole borrower

CBL as principal borrower ASLplus lender(s)

Clearstream Intl. Collateral agent

Securities lending and borrowing for selected securities (2006)

Secured Financing : The way forward Euro GC Pooling - EGCP

Clearstream, 28 April 2010 20

§ Anonymous trading § Zero capital cost due to

CCP (Eurex Clearing AG)

§ ECB baskets § Standard basket: fully

re-usable for pledging with Bundesbank

§ Linking of CBL and CBF

collateral, creating one virtual collateral pool

§ Full STP, Eurex repo /

Eurex clearing / Clearstream collateral management and settlement services Secured Financing: The way forward

Euro GC Pooling - EGCP

A unique combination, providing one of the safest investments through CB Liquidity Hub (since 2005)

Euro GC Pooling participant Eurex repo Trading Eurex clearing Clearing (CCP) Clearstream Cmax / Xemac Luxembourg / Frankfurt Collateral management / settlement / custody

Clearstream, 28 April 2010 21

Clearstream’s Liquidity Hub

Voting Question What do you expect the most from a Triparty collateral agent ?

1.

To constantly develop and invest in a sophisticated and flexible collateral management system.

2.

To assist in finding and setting up new trading relationships.

3.

To ensure eligibilty criteria are respected and collateral is secured.

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

Clearstream, 28 April 2010 23

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.

n

Triparty Repo – a unique risk/return mix for secured sameday cash lending in JPY, HKD, SGD, AUD

n

Triparty Securities Lending – a flexible solution for securing loan exposures

n

Triparty Collateral Management – an efficient means of collateralizing all types

• f exposures, including OTC derivates margining and central bank discount

window borrowing/payment facilities.

Clearstream, 28 April 2010 24

Clearstream’s Liquidity Hub

Voting Question What type of exposure is most worthwhile securing via a Triparty collateral agent ?

1.

Cash (Reverse repo).

2.

Securities loans (securities lending).

3.

Derivatives/margining.

4.

Central Bank discount window borrowing

Clearstream, 28 April 2010 25

Clearstream’s Liquidity Hub in Asia

Same Day Triparty Repo Notification Deadlines in Asian Markets

Currencies Securities Allocation Securities Allocation(SD-1) Securities 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 JPY AUD SGD HKD 17:00 17:00 17:00 17:00 17:00 17:00 17:00 17:00 10:30 04:30 (10:30)* 05:00 (11:00)* 07:00 (13:00)* 10:30 04:30 (10:30)* 05:00 (11:00)* 07:00 (13:00)* CZK, SKK, ILS 17:00 17:00 N/A N/A NZD,KWD,PHP,THB, MYR, ROL,XAU *(HongKong / Singapore timezone) 12:00 14:00 N/A N/A

Clearstream, 28 April 2010 26

Clearstream’s Liquidity Hub in Asia

21h/24h Triparty Collateral Management Services

Settlement processing

• RTP : Real-Time Processing
• DTP : Daytime Processing – End of day process

Settlement throughout the day Triparty Collateral Management processing throughout the day

Real-time BAO

21:00 SD-1

SG time Luxbg time

04:00 SD 04:00 SD+1 01:00 SD+1 RTP RTP DTP 18:00 SD 21:00 SD

Clearstream, 28 April 2010 27

Clearstream’s Liquidity Hub in Asia

Intraday Liquidity between and beyond APAC markets

n New triparty trades will be allocated in real-time between 00:04 SG time on SD

(21:00 CET on SD-1) and 00:01 SG time on SD+1 (18:00 CET on SD).

n Mobilise assets accross location through different time zone in a single day and

support intraday liquidity from Tokyo via London to New York.

n Enjoy local market access in the APAC region (Australia, China, Hong Kong,

Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Thailand) and in 35 Markets around the world.

n Asset Optimisation (substitutions, margin calls) will be treated every 15 minutes. n Auto Allocation in real-time to optimise collateral allocation and cover any under-

collateralised positions.

Clearstream, 28 April 2010 28

Clearstream’s Liquidity Hub in Asia

A global collateral pool for Securities Lending

n ASLplus (Strategic Securities Lending)

n

Capitalise on greater lending opportunities during the APAC business day, to achieve higher portfolio yields.

n

Mobilise APAC securities, including JGB’s, KTB’s,..

n ASL (Automated Securities Lending)

n

Boost your settlement efficiency around-the-clock through our automatic fails lending program.

n

Lenders can opt to limit their lending acivity in accordance to time-zone and business needs.

Clearstream, 28 April 2010 29

More than 375 participants, with more to come as demand is growing Clearstream’s Liquidity Hub in Asia

Facts and Figures

Peak at € 512 bn

Christian Rossler Senior Vice President Global Securities Financing Sales and Relationship Clearstream Banking Singapore