LONDON May 12 CME Group's European
clearing house and the post-trade arm of Swiss exchange operator
SIX Group have teamed up to create a platform to manage
collateral used to back derivatives trades.
Collateral management has become a top priority for banks
and financial institutions due to new rules requiring that more
derivatives trades be conducted through electronic platforms,
pushed through clearing houses and backed by collateral, often
cash or top-quality government bonds.
SIX Securities Services (SIS) said on Monday the new service
allowed market participants to place collateral directly in CME
Clearing Europe's account at its central securities depository,
giving greater clarity on how collateral is being used and what
is available to meet margin requirements.
It also provides automated segregation, or ring-fencing, of
one client's assets from another.
Once regulators give the system the green light, it will
first be available for Swiss-based insurance companies. CME and
SIX plan to later roll out the service to other markets and
A number of companies have introduced new collateral
management services to capitalise on the market reforms. Last
week, the Depository Trust & Clearing Corporation and Euroclear
announced a joint venture to simplify settlement of trades and
ease access to collateral.
Separately on Monday, CME said the Bank of England had
approved its full segregation client protection model, the first
such model that gives clients control of the securities they use
to back trades at all times and creates legal certainty about
how assets would be treated if a clearing member or a number of
clearing members went bust.
The service, which goes beyond the requirements of the
European Union's European Markets Infrastructure Regulation,
will be available for the clearing house's over-the-counter
financial and commodity derivatives as well as futures products,
(Reporting by Clare Hutchison; Editing by Mark Potter)