ABN AMRO Clearing, EuroCCP, Euroclear and Nasdaq have completed a
joint proof of concept to make the use of securities more efficient
when used to cover margin calls, including after business hours,
using blockchain, or distributed ledger technology (DLT).
This solution addresses significant business challenges and
inefficiencies related to the current provision of collateral to
Central Counterparties (CCPs) and has demonstrated that a shared,
resilient network can be built between collateral givers,
collateral takers and intermediaries.
The inefficiencies of collateral processing have been heightened
as a result of recent market changes such as extended trading hours
by stock exchanges and the requirement to centrally clear
derivatives traded bilaterally (OTC) under the European Market
Infrastructure Regulation (EMIR). Today, a CCP margin call
typically needs to be covered by euro collateral within a short
time frame. After the regular hours of central banks and central
securities depositories, usually ending at 18:00 CET, options are
limited. Several CCPs currently allow for the use of securities to
cover intraday (evening) initial margin calls, but this method is
rarely used due to inefficient and complex securities delivery
processes.
As an increasing number of buy-side market participants
centrally clear their derivatives trades, the need to provide an
efficient securities collateral solution has become essential.
Using the solution developed in the proof of concept, parties were
able to handle the margin call, the securities collateral delivery
and the return process within minutes. Clearing participants and
CCPs were able to optimise their collateral positions through a
collateral dashboard.
The underlying collateral transfers were processed by
Euroclear’s Central Securities Depository, ensuring settlement
finality and regulatory compliance.
Nasdaq developed the proof of concept for the DLT nodes while
ABN AMRO Clearing, EuroCCP and Nasdaq Clearing developed a specific
front-end and managed integration into their own environments.
Coen van Walbeek, Global Head of Treasury and SBL at ABN AMRO
Clearing said: “With a faster and more globalised market, it is
essential to make the processing of collateral more efficient.
Expanding the possibilities to use securities as collateral will
make clearing through CCPs more attractive and cheaper for buy-side
market participants. This is a breakthrough for the CCP model.”
Diana Chan, CEO at EuroCCP said: “We are excited to be
partnering on a proof of concept that is extremely useful for
transactions that are not already well-served by market
infrastructures. With a solution like this in place we will be able
to efficiently provide counterparty risk protection of equity
trades after hours while reducing operational complexities. Today
we are limited by European banking hours or arrangements in other
time zones.”
Walter Verbeke, Global Head of Business Model and Innovation at
Euroclear added: “As a major collateral house, holding € 28.5
trillion worth of assets, we are pleased to participate in this
initiative. It demonstrates that a smart combination of NewTech and
the resilience of the Central Securities Depository can work
effectively and in full compliance with regulatory
requirements.”
“As both a leading market technology provider and a CCP
operator, Nasdaq is uniquely positioned to bring efficiencies to
collateral management. We believe that blockchain technology brings
with it a huge potential to transform markets everywhere, and this
project is an excellent showcase of this,” said Julia Haglind, CEO
of Nasdaq Clearing.
About ABN AMRO Clearing
ABN AMRO Clearing is one of the world’s leading providers of
clearing and financing services for listed derivatives and cash
securities, OTC products, warrants, commodities and FX. With 11
offices globally employing more than 800 staff, ABN AMRO Clearing
services clients on 160+ exchanges, MTFs and FX liquidity centres
and consistently ranks as a top 3 clearer in most time
zones. We consistently post over 20% market share of
transactions cleared on most relevant derivatives exchanges
globally. ABN AMRO Clearing offers an integrated approach to global
transaction processing, financial logistics and risk management and
processes over 16 million trades per day.
ABN AMRO Clearing received the FOW Award as the ‘Proprietary
Traders’ Clearing Firm of the Year’ (Dec 2013, 2014, 2015,
2016,2017); the CTA Intelligence Award for FCM – Best Client
Service (US, Jan 2015 and 2016; Europe, Nov 2016), FCM – Innovation
(US, Jan 2017; Europe, Nov 2017) and Best FCM – Overall
(Europe, Nov 2015). We also received the HFM-Week Service
Award for Best Prime Broker – Client Service (Europe, Apr 2016).
For more information: www.abnamroclearing.com
About EuroCCP
EuroCCP clears equities traded on stock exchanges, multilateral
trading facilities and other trade sources. After a trade has been
executed, EuroCCP centrally manages counterparty risk for trading
firms and reduces their post-trade costs through netting. EuroCCP
is the most connected CCP in Europe, with access to 82% of equity
trades executed on 26 trading platforms. EuroCCP clears equities,
ETFs and depositary receipts listed in 19 national markets
including the United States.
EuroCCP is headquartered in Amsterdam, equally owned by the
stock exchanges Cboe Europe, Euronext and Nasdaq, by ABN AMRO
Clearing Bank and by The Depository Trust & Clearing
Corporation (DTCC).
About Euroclear
Euroclear group is the financial industry’s trusted provider of
post trade services. At the core, the group provides settlement,
safe-keeping and servicing of domestic and cross-border securities
for bonds, equities and derivatives to investment funds. Euroclear
is a proven, resilient capital market infrastructure committed to
delivering risk-mitigation, automation and efficiency at scale for
its global client franchise.
The Euroclear group includes Euroclear Bank - which is rated AA+
by Fitch Ratings and AA by Standard & Poor’s - as well as
Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear
Nederland, Euroclear Sweden and Euroclear UK & Ireland. The
Euroclear group settled the equivalent of EUR 733 trillion in
securities transactions in 2017, representing 215 million domestic
and cross-border transactions and held EUR 28.6 trillion in assets
for clients.
About Nasdaq
Nasdaq (Nasdaq:NDAQ) is a leading global provider of trading,
clearing, exchange technology, listing, information and public
company services. Through its diverse portfolio of solutions,
Nasdaq enables customers to plan, optimize and execute their
business vision with confidence, using proven technologies that
provide transparency and insight for navigating today's global
capital markets. As the creator of the world's first electronic
stock market, its technology powers more than 90 marketplaces in 50
countries, and 1 in 10 of the world's securities transactions.
Nasdaq is home to approximately 3,900 total listings with a market
value of approximately $13 trillion.
To learn more, visit: http://business.nasdaq.com
For further information please contact
ABN AMRO Clearing: Brigitte Seegers +31 20 6283365,
brigitte.seegers@nl.abnamro.com
EuroCCP: Jeff Watt, Greentarget, +44 207 324 5482,
jeff.watt@greentarget.co.uk
Euroclear: Inge Drijkoningen, +32 2 326 4431,
inge.drijkoningen@euroclear.com
Nasdaq: David Augustsson, +46 734496135,
david.augustsson@nasdaq.com
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