Meeting User Demand, Reducing Risk, Improving Liquidity and Driving Efficiency in Financial Markets
With increasingly stringent regulatory requirements and generally higher capital costs, financial market participants are focusing on optimising the use of collateral to manage their risk exposures (against other participants and CCPs) and obtain liquidity for short-term funding purposes.
ASX Collateral is a centralised collateral management service that leverages technology provided by Clearstream Banking SA to facilitate the allocation and optimisation of collateral across an array of bilateral agreements and counterparties, providing significant efficiencies and benefits to customers.
- State of the art Triparty Repo Service and Triparty Collateral Management Service with direct links to the Austraclear settlement system (and in a further phase of the service, direct links to CHESS) optimising collateral across:
- repurchase agreements: intraday, overnight and term
- securities lending and borrowing
- OTC derivatives bilateral exposures
- central counterparty margining
- Comprehensive collateral management administration services
- Collateral cover is managed based on the collateral receiver’s requirements and eligibility criteria, through effective mark to market processes and proactive margining
- Auto-assignment of assets as collateral based on agreed eligibility
- Facilitation of payments to collateral givers where interest or distributions are due
- Giving collateral givers the ability to substitute collateral at any time
- Giving collateral receivers the ability to re-use collateral within the ASX Collateral environment
ASX Collateral will deliver the following benefits to users
- Meeting user demand
- Regulatory changes, including Basel III, mandatory clearing, segregation and BCBS-IOSCO are increasing the need for collateral
- With increased collateral requirements, there is a corresponding need for collateral to be optimised and managed efficiently
- Reducing risk
- Reducing counterparty risk
- While also leveraging third party agent expertise in minimising market risk, operational risk and settlement risk
- Neutral agency service resulting in effective collateral optimisation
- Improved liquidity
- Potential to reduce borrowing costs through secured lending
- Administration of assets performed by ASX Collateral allowing otherwise difficult to manage assets to be used as collateral for trading purposes
- Improved efficiency
- Cost savings in reduced operational impacts through automation
- Centrally managing the mark to market and margining process
ASX Collateral will be based on proven technology
- Offers enhanced operational control through an automated collateral management solution, developed in partnership with Clearstream Banking SA
- State of the art collateral management system, including a proven asset optimisation algorithm, already in use in many overseas markets
- ASX Collateral will provide users with optimisation of their collateral for 'the right collateral, in the right place, at the right time'
ASX Collateral delivery timeline
The timeline for ASX Collateral highlights the key dates for delivering the service to participants over the coming months following the successful technical launch of the Austraclear phase of ASX Collateral on 29 July 2013.
Recent articles and publications
A recent paper by the RBA looked at the increasing demand for Australian Dollar denominated liquid assets as collateral, both for short term funding and to manage counterparty credit risk on derivatives transactions. The paper explores the likelihood of further demand for assets with low market and credit risk arising from regulatory changes.
RBA paper on financial regulation and Australian dollar liquid assets - Bulletin Sep Quarter 2012
On 17 January 2013, ASX announced that it had partnered with Clearstream and three other CSDs worldwide to form the Liquidity Alliance, an association of industry peers which aims to create a sustainable international industry approach to address the global collateral crunch.
Liquidity Alliance A Sustainable Solution to Combat the Global Collateral Challenge (PDF 2.07MB)
ASX Collateral Product Guide (PDF 3.95MB)
The composition of ASX Clearing Corporation Limited and ASX Clear (Futures) Pty Limited standard eligibility profiles (“ASXCC” and ASXCF” respectively) can be viewed at http://www.asx.com.au/services/clearing.htm .
ASX Collateral provides a secure web interface, “ASXCOL+” that runs in a secure Virtual Private Network (VPN) environment or over the internet. Customers can use ASXCOL+ to instruct new exposures and to monitor their existing exposures. An instructional video on the use of ASXCOL+ is available here and also available in other formats upon request.
Senior Manager – Settlement Services
Telephone: +612 9227 0782
Manager – Settlement Services
Telephone: +612 9227 0539
General Manager – Settlement Services
Telephone: +612 9227 0596