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ASX Collateral

Ensuring the right collateral, is delivered to the right place, at the right time

With increasingly stringent regulatory requirements (including Basel III, mandatory clearing, segregation and BCBS-IOSCO) 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, ASX's Centralised Securities Depository (CSD) tri-party collateral management service, provides a flexible, scalable solution to efficiently collateralise exposures across a range of A$ products.

A comprehensive solution

ASX Collateral is the only live, fixed income, tri-party repo securities lending and collateral management service provider in Australia that mobilises collateral directly within the CSD. The service collateralises exposures across a range of A$ products, including:

  • Securities lending and borrowing
  • Repurchase agreements: intra-day, overnight and term
  • Lending
  • OTC derivatives bilateral exposures
  • Central Counterparty (CCP) margining

State of the art technology

ASX Collateral leverages Clearstream Banking SA technology to facilitate the automatic allocation and optimisation of collateral across an array of bilateral agreements and counterparts. Assets are assigned as collateral based upon a set of elegibility criteria determined by the counterparts. The automated service uses proven asset optimisation algorithms and integrates directly with ASX's Austraclear and CHESS securities settlement services to ensure smooth transition of collateral between collateral givers and takers.
 

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Benefits

  1. Considered the needs of givers and takers
    • Automatically facilitates interest or distribution payments to collateral givers, according to their nominated preferences
    • Collateral givers can request collateral substitution at any time and have the option to auto-allocate assets from their source account
    • Facilitation of payments to collateral givers where interest or distributions are due
    • Collateral takers maintain full cover through effective mark to market processes and proactive margining
    • Collateral takers can also reuse collateral within the ASX Collateral environment
  2. Reduced risk
    • Collateral within the service is held in special purpose accounts within Austraclear to reduce counterparty risk
    • Third party agent expertise is leveraged to minimise market risk, operational risk and settllement risk
    • Neutral agency service ensures effective collateral optimisation
  3. Highest regulatory standards
    • Underpinned by Austraclear and CHESS (both of which are Systemically Important Financial Insitutions)
    • Assessed annually by the RBA and ASIC
    • Clearstream Banking SA is regulated by Luxembourg's own central bank, the Banque Centrale du Luxembourg
  4. 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

ASXCOL+ web interface

ASX Collateral's secure ASXCOL+ web interface service can be run in a secure Virtual Private Network (VPN) environment or over the internet. Customers can use ASXCOL+ to instruct new exposures and monitor their existing exposures. An instructional video on the use of ASXCOL+ is available here (available in other formats upon request).

Articles and publications

In 2013, ASX announced a partnership 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.

A paper published by the Reserve Bank of Australia (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

Support material

ASX Collateral Quarterly Bulletin (April 2016)

ASX Collateral Fact Sheet

ASX Collateral Product Guide

ASX Collateral Fee Schedule

ASX Clearing Corporation and ASX Clear (Futures) Standard Eligibility Profiles

Further information

Fona Hughes
Manager, Sales - ASX Collateral
T: +61 2 9227 7815
E: Fiona.Hughes@asx.com.au

 

John Pearce
Manager, ASX Collateral
T: +61 2 9227 0451
E: John.Pearce@asx.com.au

 

Blair Harrison
Senior Manager, ASX Collateral and Austraclear
T: +61 2 9227 0782
E: Blair.Harrison@asx.com.au