GlobalCollateral, the tie-up between European-headquartered Euroclear and US-based DTCC to create the world’s largest pool of collateral, has signed up Northern Trust to its settlement and tracking service, a couple of weeks after State Street came on board.
So far, GlobalCollateral has focused on North America and Europe for launching the settlement and tracking service. The joint venture will continue its efforts in those regions, according to chief commercial officer Ted Leveroni, but plans to increase engagement with businesses in the Asia-Pacific region in 2017.
He said: “As we firm up our adoption within the first few markets, we’re going to start shifting and becoming even more engaged in Apac.”
The joint venture was launched in September 2014 with the aim of creating a single pool of collateral and increasing the global mobilisation of assets. The new business sought to ease the strain on liquid assets, which are increasingly in demand for use as collateral as a result of new regulations, including more stringent capital requirements and clearing rules.
The settlement and tracking service, which is expected to go live in the first half of 2017, automates the collateral instruction and settlement process between firms to ensure collateral goes to the right place, and monitors for settlement. At present, many participants in the market rely on fax and email communications. Automating the process is intended to reduce the errors, collateral fails and delays associated with the manual processes in place.
The addition of fund administrators Northern Trust and State Street adds volume to the service. Leveroni said: “Whether it’s global collateral or whether it’s the telephone or email, the more people that are on it the more value you get out of it. So these represent significant collateral volumes.”
He added: “Once you have firms on a single platform for their margin call settlement, it allows you to then expand.”
The idea is for an integrated model to make it possible for firms to manage all of their collateral centrally, be it repo collateral, over-the-counter derivatives collateral or futures collateral.
Leveroni said access to a global pool of collateral would enable firms to break down silos and to “mobilise” collateral from one jurisdiction to another. He said: “This idea of a global collateral hub is the direction that we want to go in.”