Strate exploring collateral management cooperation for SA
 n 18 January 2012, Clearstream and Strate, the South African central securities depository, signed a Letter of Intent (LOI) aimed at exploring a new triparty collateral management service for South Africa. The service intends to target the collateralisation of exposures in the South African market. Under the LOI, Strate will look to utilise Clearstream’s collateral management infrastructure, the Global Liquidity Hub, for the allocation, optimisation and substitution of local collateral. The system operates on a fully automated basis in real time and could enable Strate clients to handle their domestic collateral holdings and exposures more efficiently without the need to move collateral out of the domestic South African environment.
Jeffrey Tessler, CEO Clearstream, said: “The ongoing financial crisis and regulatory initiatives like EMIR or reforms like Basel III require market participants to improve their liquidity management. Companies need to more efficiently handle their collateral holdings and exposure, and our outsourcing service addresses this industry concern. We are delighted to work with Strate to examine the development of a collateral management service for South Africa.”
Monica Singer, CEO Strate, said: “Strate continues to explore ways to ensure that South Africa is fully integrated into the global financial markets. We are always looking for ways to introduce efficiencies for our clients, while at the same time reducing their risk. We look forward to working with Clearstream on this initiative.”
Clearstream and Cetip, the Brazilian CSD that operates the leading marketplace for fixed income securities and over-the-counter (OTC) derivatives in Latin America, have launched their collateral management outsourcing service for Brazil on 18 July 2011. In August, Clearstream and the Australian Securities Exchange announced exclusive negotiations to jointly develop a Liquidity Hub GO offering for the Australian market.
The ongoing service development of the Clearstream infrastructure ensures that the users of the collateral management outsourcing service are always in line with changing regulations and market behaviors. Clearstream is the only collateral management services provider in a position to manage collateral across time zones and regions while the assets stay in the respective domestic market and under local legislation, which is a prerequisite for many countries before moving into a collateral management outsourcing agreement.
Collateral is kind of a guarantee that market participants ask for in order to secure exposures resulting from financial transactions. The current global financial market environment as well as the wave of upcoming regulatory changes requires financial and non-financial institutions to improve their liquidity management and, accordingly, their collateral management efficiency.
The recently published Accenture/Clearstream report “Collateral Management: Unlocking the Potential in Collateral” revealed that the financial services sector could save more than 4 billion Euros annually in collateral management costs by addressing operational inefficiencies: decentralized operations and unaligned business objectives are limiting banks’ ability to manage collateral efficiently. As a result, banks are unable to maximize liquidity, keep down financing costs and are forced to maintain excess collateral buffers. The report was based upon one-on-one interviews with 31 executives at 16 global banking institutions that manage nearly 20 percent of total global banking assets and on the analysis of publicly available industry data.
About Clearstream
Clearstream is the leading service provider in liquidity and collateral management services in Europe with more than 20 years of experience in this field. Monthly average outstanding reached 638.7 billion Euros in December 2011. Clearstream provides integrated collateral management services for margining, including auto allocation, optimization and auto substitution of collateral across time zones and for a wide range of market players, i.e. stock exchanges, clearing houses, central securities depositories, central banks, commercial banks, private banks, asset managers, insurance companies and an ever growing number of corporates.
As an international central securities depository (ICSD) headquartered in Luxembourg, Clearstream provides the post-trade infrastructure for the Eurobond market and services for securities from 52 domestic markets worldwide. Clearstream’s customers comprise approximately 2,500 financial institutions in more than 110 countries. Its services include the issuance, settlement and custody of securities, as well as investment fund services and global securities financing. With almost 11 trillion Euros in assets under custody, Clearstream is one of the world’s largest settlement and custody firms for domestic and international securities.
As a central securities depository (CSD) based in Frankfurt, Clearstream also provides the post-trade infrastructure for the German securities industry, offering access to a growing number of markets in Europe.
Further information: www.clearstream.com
About Strate
Strate is the licensed Central Securities Depository (CSD) for the electronic settlement of financial instruments in South Africa. As the trusted independent provider of innovative post-trade products and services in Africa, Strate offers state of the art technology, international expertise and global best practice to the financial markets. The company settles close to 30 million transactions per year, with assets under custody in excess of ZAR 6.4 trillion (6.4 billion Euros).
Strate provides electronic settlement for securities including equities, bonds and money market securities. It also settles derivative products such as warrants, Exchange Traded Funds (ETFs), retail notes and tracker funds for Africa’s largest stock exchange, the Johannesburg Stock Exchange (JSE), and equities for the Namibian Stock Exchange.
Media contact Clearstream
Nicolas Nonnenmacher +352-243-36115
nicolas.nonnenmacher@clearstream.com
Media contact Strate
Tanya Knowles, + 27 (11) 759 5317
tanyak@strate.co.za
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