ASX will provide a centralised collateral management service (“ASX Collateral”) that will leverage existing technology provided by Clearstream Banking SA, to facilitate the allocation of cheapest acceptable collateral for a repurchase agreement (“repo”), for exposure management or for short term funding purposes across an array of bilateral agreements and counterparties. This will provide significant efficiencies to service users.
Financial market participants are focusing on more optimal use of collateral to manage their risk exposures (against other market participants and CCPs) as well as for obtaining central bank liquidity and for short term funding purposes because of increasingly stringent regulatory requirements and generally higher capital costs.
State of the art Triparty Repo Service and Triparty Collateral Management Service with direct integration to securities settlement facilities (Austraclear, CHESS)
- repurchase agreements: intraday, overnight and term
- securities lending and borrowing
- OTC derivatives bilateral exposures
- central counterparty margining
- Comprehensive collateral management administration services
- Keeping collateral receivers fully covered at all times based on their 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
- Improved Liquidity
- Potential to reduce borrowing costs through secured lending
- Neutral agency service resulting in effective collateral optimisation
- 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 to ensure:
'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 with a targe go live in 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.
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.
For further details on ASX Collateral and how your company can become a foundation user, please contact:
Manager – Settlement Services
Telephone: +612 9227 0539
General Manager – Settlement Services
Telephone: +612 9227 0596