Clearstream and the Dubai Commodities Clearing Corporation (DCCC), the central counterparty (CCP) of the Dubai Gold and Commodities Exchange (DGCX), have agreed to cooperate on collateral management for CCP margining. The Middle Eastern CCP will become the first in the region to join Clearstream’s Global Liquidity Hub network in Q1 2014.
DGCX customers will be able to use the collateral pools available on Clearstream’s Global Liquidity Hub, which pools collateral with strategic partners around the world in-line with the new post-crash regulatory environment, to meet margin requirements at the DCCC.
Other partners already on the Clearstream platform include central securities depositories (CSDs) like Iberclear in Spain and CCPs and partner agent banks and organisations around the world, such as ASX (Australia), CDS (Canada), Cetip (Brazil), SGX (Singapore), Strate (South Africa), and BNP Paribas, Citibank and Standard Chartered. In total, the Global Liquidity Hub has over 550 counterparties, rivalling similar offerings from Euroclear and others in the marketplace, with some overlap inevitable.
The Hub is a single, global collateral pool which consolidates assets held at Clearstream and its strategic partners in order to meet the enhanced collateral requirements following the new 2008 crash and comply with the new regulations and market practices emanating from it. It is automated and has an open architecture to easily allow participants to join and to use liquidity from multiple sources to cover multiple exposure locations.
The increasing number of exposure locations spread around the world (such as CCPs) joining the Global Liquidity Hub and of Clearstream’s worldwide strategic partners (such as CSDs and agent banks) means Clearstream can compete for liquidity and risk management services more effectively. Its latest customer in Dubai, UAE, strengthens the worth of its office in the Gulf Emirate which was opened in 1995 to provide post-trade services to the growing Middle-East and Africa region.
“We are happy to form an alliance with Clearstream to support our members in seamlessly and efficiently accessing global liquidity pools,” said Gary Anderson, chief executive officer (CEO) of the Dubai Gold and Commodities Exchange (DGCX). “Partnerships like these are key building blocks in our efforts to transform the Middle East’s derivatives marketplace and become a key hub in the global liquidity infrastructure map. Demand for collateral is expected to grow significantly, driven by both market forces and regulatory reform, and DGCX is keen to support its members in deploying collateral optimally without fragmentation.”
According to Gaurang Desai, chief operating officer (COO) of the DCCC, the partnership with Clearstream strengthens its overall offering for DGCX members with a service that promotes significant efficiency gains in managing and transferring collateral. “This alliance takes our strategic efforts of being the CCP of choice in the region a notch further by providing products and services of international standards to our customers.” he said. “The Clearstream alliance not only allows us to help our members in addressing key liquidity requirements but also creates new value and revenue opportunities through improved collateral management.”
Explaining the strategy behind the move, Stefan Lepp, head of global securities financing and a member of the board at Clearstream, stressed he was pleased to welcome DCCC into the Hub as a CCP partner. “Our strategy is to grant the market access to a growing number of exposure locations such as globally fragmented CCPs, while at the same time connecting to an increasing number of collateral locations,” he said. “The most important feature of our open model is that the collateral remains in its current environment and with our partner CSDs, with agent bank and with global custodian partners.”
By Neil Ainger