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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 securities settlement service (and CHESS replacement n a later phase) to ensure smooth transition of collateral between collateral givers and takers.

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  1. Considers the needs of both collateral 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
    • 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 counterparty risk
    • Collateral within the service is held in special purpose accounts within Austraclear
    • This feature reduces counterparty risk by enabling customers to hold their collateral in an account structure which suits their principal agreement, and segregate their collateral across different accounts as they require
  3. Highest regulatory standards
    • Underpinned by Austraclear which is a Systemically Important Financial Insitution(SIFI)
    • Assessed annually by the Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC)
    • Clearstream Banking SA is regulated by Luxembourg's own central bank, the Banque Centrale du Luxembourg
    • ASX Collateral is the only tri-party collateral manager to be appointed by the RBA, who use ASX Collateral to conduct tri-party repo transactions with its members in its Open Market Operations (OMO)
  4. Servicing a range of A$ exposures, including:
    • Tri-Party Repo Services (TRS) provides a Delivery versus Payment (DvP) mechanism for the principal settlement collateralisation and maintenance of repo transactions
    • Tri-Party Collateral Management Service (TCMS) provides a Free of Payment (FoP) mechanism for the collateralisation and maintenance of various exposure types, including exposures relating to securities lending and borrowing, CSA margining and CCP margining
    • Tri-Party Securities Lending Service (TSLS) provides a Delivery versus Delivery (DvD) mechanism for the principal settlement, collateralisation and maintenance of securities versus securities transactions, including exposures relating to securities lending and borrowing

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

ASX Collateral Fact Sheet

ASX Collateral Product Guide

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

Further information

T: +61 2 9227 0026