September 30, 2014

DTCC and Euroclear Form JV to Solve Collateral Squeeze

Will an Expanded Collateral Pool Provide Enough Assets for Future OTC Margin Requirements?

DTCC & Euroclear have announced an agreement to form a JV containing technology and operational services to create a fungible pool of assets between the US and EU. The details are announced on the Euroclear website and in the FT, and on the DTCC site.  Key features of this JV are:

  • Called DTCC-EuroClear Global Collateral Ltd, domiciled in the UK, incorporsted four days ago (on the 26th)
  • Michael Shipton, Euroclear Managing Director and Head of Corporate Technology, will assume the role of Chief Executive Officer
  • Mark Jennis, DTCC’s Managing Director, Strategy and Business Development, assuming the role of Executive Chairman
  • The joint venture will bring to market a Margin Transit Utility (MTU) and Collateral Management Utility (CMU). The MTU will provide straight-through processing of margin obligation settlement, leveraging current DTCC infrastructure, as well as additional infrastructure currently in development in coordination with the industry. Industry testing of the MTU is scheduled to begin in mid-2015. The CMU will address the global challenge of sub-optimal collateral allocation and mobility, through utilizing Euroclear’s market-leading Collateral Highway, and will follow the launch of the MTU

For more details on the scope of assets and eventual goals read the FT story, this seems like a big deal for everyone, and puts the JV at the heart of the capital markets, providing a new piece of global market infrastructure which glues together assets and liabilities seamlessly.



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