Triparty Arrangements for Collateral Management

Transcription

1 Triparty Arrangements for Management IIFM Industry Seminar on Islamic Capital Market, Liquidity Management and Risk Mitigation Instruments Bahrain, 9 th December 2012 José Manoka Mussala Global Securities Financing Product Manager Clearstream Banking Content 1. Overview 2. Legal framework 3. Account set-up Initiation 2. Daily mark-to-market 3. Exposure increases & decreases 4. Substitutions 5. Custody 6. Closing 5. Communication and reporting 6. Contact 2 1

2 Triparty Management Overview Fully collateralised agency service Securities pledged under highly acclaimed Luxembourg law or transfer of title structure to support bilateral industry contract Daily mark-to-market of collateral and pro-active margin calls Unlimited collateral substitution capabilities In-built re-use capability, allowing customers to onwards pledge Triparty received in favour of any other Receiver Full custody service, including coupon and redemption processing Detailed daily valuation reports using multiple data sources 3 Legal framework Clearstream acts as collateral agent Receiver CMSA_CR Pledge or Transfer of Title Governed by Luxembourg and Domestic law Giver CMSA_CG A multilateral Management Service Agreement (CMSA) appoints Clearstream Banking as collateral service agent. 4 2

3 Legal framework Bilateral Documentation Clearstream assumes that the principal bilateral agreements have been duly executed Triparty Documentation Management Service Agreement for Receivers (CMSA_CR) Management Service Agreement for Givers (CMSA_CG) Appendix A. Schedule Sets collateral eligibility rules and margins specified by the Receiver 5 Account set-up Giver source account(s) Givers can allocate from multiple accounts: Proprietary accounts in Clearstream accounts in Clearstream (via the reuse functionality) Accounts at other domestic and/ or international depositories account The Receiver has a single dedicated collateral account per counterparty in Clearstream The accounts are opened under a pledge or Transfer of Title structure, in the name of the Giver or the Receiver 6 3

4 Initiation Giver sends initiation instruction to Clearstream Validates and matches both instructions in real-time Checks availability of collateral in realtime Verifies eligibility and sufficiency of collateral Receiver sends initiation instruction to Clearstream Giver Generates FOP instructions if securities are held in Clearstream OR Counterpart instructs own depot to deliver to own transit account in Clearstream Reports on securities transfers Receiver 7 Daily mark-to-market Clearstream selected price feeds Primary sources IDC and Bloomberg Secondary sources Reuters and Telekurs Daily valuation of all positions AutoAssign mode Margin calls will be triggered automatically to keep the collateral value in line with the exposure 8 4

5 Exposure increases & decreases Exposure increases The Giver & Receiver send a notification of the new/ increased exposure Clearstream creates the collateral settlement instructions for the collateral increase Exposure decreases The Giver & Receiver send a request to decrease the exposure Clearstream decreases the collateral amount accordingly and delivers collateral back to the Giver s source account 9 Substitutions Substitutions are initiated by Clearstream (AutoAssign mode) or by the Giver (Manual allocation mode) New (replacement) securities are available on a Clearstream account or proposed to Clearstream by the settlement deadlines Clearstream verifies eligibility & sufficiency and generates DVP settlement instructions (DVP=Delivery versus Payment) Replacement securities post-margin value should be at least equal to or greater than the post-margin value of the securities being recalled from the Receivers account Exchanges are processed on a simultaneous delivery versus payment basis, where the cash movements are netted out if the exchanges are successfully settled 10 5

6 Custody Unless otherwise specified by the Receiver, Clearstream will transfer any income proceeds accruing on collateral securities from the Account to the Giver s account with good value Up-coming income events notifications are sent to the Giver or Receiver for a possible substitution to be initiated before the record date of the up-coming event In AutoAssign mode, substitutions of taxable securities, as well as securities subject to redemption, will be triggered automatically prior to the record date of an event. Auto substitution Auto substitution Auto substitution Eligible for allocation Ineligible for allocation Eligible for allocation Settlement date Record date -2 days Record date -1 day Record date 11 Closing As in the case of decreases of exposure, closings can only be processed once matching notifications from both Giver and Receiver have been received Free-of-payment movements of collateral are generated, returning all securities to the Giver 12 6

7 Communication and reporting Communication Media SWIFT MT527 Formatted Triparty Instruction CreationOnline Clearstream on-line connectivity tool SWIFT MT599 Free Format Message Specific Triparty Reports are available via: SWIFT MT558 and MT569 CreationDirect (FTP) SWIFTNetMail Fax 13 Example of the Daily Exposure Report 14 7

8 Contacts Global Securities Financing Sales & Relationship Management Team Luxembourg Frankfurt +49-(0)