Euroclear Bank and CME Clearing Europe have signed an agreement to help mutual clients fulfil their collateral obligations to meet initial margin requirements at CME Clearing Europe. Under the agreement, Euroclear Bank will source and manage securities collateral for this purpose on behalf of clients from its global ‘collateral highway’.
The bank commented that the mounting pressures of managing securities collateral effectively to cover exposures arising from the growing involvement of central counterparties (CCPs) in more types of transactions, made this arrangement a very sensible approach.
Using Euroclear Bank’s triparty collateral management expertise to meet the risk management needs of CME Clearing Europe will serve to bolster the stability and solidity of the CCP while enabling its members to focus on their trading strategies.
“Triparty collateral management services bring additional flexibility to the markets we serve and offer greater certainty in a default management scenario,” said Andrew Lamb, chief executive officer (CEO), CME Clearing Europe. “By working closely with our members, and with a range of proven infrastructure service providers like Euroclear Bank, we are strengthening our offering to market participants.”
Saheed Awan, global head of collateral management services at Euroclear Bank, added: “Central counterparty clearing institutions like CME Clearing Europe playing a vital role in mitigating credit risk, expanding their role further with new regulatory requirements for over the counter (OTC) derivatives transactions. Indeed, we are very committed to these key infrastructure institutions.
“We have made our collateral highway available to them so that their clearing members, who are also our clients, are able to deliver collateral for CCP margin calls with ease and efficiency through our triparty collateral management service.”