Leading global fund administrator to pilot GlobalCollateral’s Settlement Messaging Service in order to streamline margin call processes, enhance client service and improve custodian communications
DTCC-Euroclear GlobalCollateral Ltd (“GlobalCollateral Ltd”), a joint venture (JV) of Euroclear and The Depository Trust & Clearing Corporation (DTCC), today announced that State Street Corporation has agreed to participate in a pilot program to test the JV’s Margin Settlement Messaging Service.
GlobalCollateral’s Margin Settlement Messaging Service powered by Margin Transit Utility (MTU) technology has been developed to provide straight-through-processing for the settlement of margin obligations. By participating in the pilot program, State Street looks to further streamline their margin call processes, increase transparency through automated collateral settlement tracking, enhance client service, and improve custodian communications. State Street will initially pilot the MTU functionality with select client portfolios to evaluate how the technology could be leveraged more broadly.
As the industry braces for upcoming global derivatives regulations that are projected to create an increase in margin calls and operational complexity, market participants are seeking to leverage a utility-based service model in order to streamline the collateral process and add transparency.
State Street and other fund administrators who support the buy-side segment are at the forefront of transforming the way collateral is processed. Today, many fund administrators leverage manual processes which create risk in the margin call process, limit collateral settlement transparency and require frequent one-on-one communications with their custodian banks. MTU provides administrators with a new way to better serve their clients globally while increasing internal operational efficiency, settlement certainty and transparency as margin call volumes increase.
“We look forward to participating in this program,” said Dick Taggart, executive vice president and head of State Street's Investment Manager Services (IMS) business. “Industry collaboration and a community-based model for margin call management can decrease risk, drive standardization and increase efficiency for our clients. As we enhance our collateral management services, we are focused on streamlining and scaling the margin call process, improving settlement certainty and increasing transparency.”
“Global derivatives regulation will require market participants to completely transform their collateral management processes, if they are to keep pace with the expected increase in collateral calls,” stated Mark Jennis, Executive Chairman at GlobalCollateral Limited. “It is great to see State Street and many of their peers acknowledging the benefits of an automated margin call process, in support of their own operational and risk management goals as well as to increase client and counterparty satisfaction.”
As of March 31, 2016, GlobalCollateral Limited received authorization from the Financial Conduct Authority (FCA) to operate its Margin Transit Utility (MTU). With this milestone met, the MTU service is now client ready and available today.
DTCC-Euroclear GlobalCollateral Ltd (“GlobalCollateral”) is a joint-venture between DTCC and Euroclear, two of the world's largest post-trade infrastructures. An open architecture infrastructure designed to streamline collateral processing globally, GlobalCollateral provides both OTC derivatives and financing solutions that deliver transparency, collateral mobility, efficiency and security through two powerful utilities:
- The Margin Transit Utility: enabling straight-through processing of margin calls and providing improved liquidity and operational risk management.
- The Collateral Management Utility: automating collateral management tasks, re-positioning inventory seamlessly across settlement locations, making collateral available wherever and whenever it is needed.