LSEG supporting Collateral Management services

Transcription

1 LSEG supporting Collateral Management services Alessandro Zignani Head of Business Development, LSEG Post Trade WFC 2015, Cancun, 20 May 2015 London Stock Exchange Group Page 1

2 Why Collateral Management is key New regulations require the use of more and more collateral: it is a valuable resource Basel III EMIR (2012) AIFMD (2013) UCITS V (2014) CSDR (2015) MIFID II (2015) 2014 vs % 100% 80% 60% Shift to secured activity in Euro markets Relevant share of Italian banks portfolio is still unexploited for secured transactions secured unsecured 40% -65% 20% 0% Source: ECB Data Warehouse Total portfolio (Fe15): 806 bn Govies 50% Uncovered Banks Bonds 35% ABS 12% Covered bonds 3% London Stock Exchange Group Page 2

3 EMIR and T2S are impacting the collateral chain in Europe Strong focus on Risk Management post Lehman failure with wave of new regulations that are impacting the usage of Collateral EMIR is forcing buy-side to hold collateral in a CSD CCP clearing of OTC Derivatives has become compulsory for buy-side clients, EMIR (art. 47.3) to hold collateral in a Securities Settlement System Expected more request of collateral to support OTC clearing T2S will consolidate the fragmented European crossborder settlement environment and will reduce settlement costs and risks Objective to reduce the costs in cross-border settlement. Reducing the risk in settlement procedures by favoring settlement in Central Bank Money (CeBM) and offering advanced standards of resiliency, availability, business continuity and security. Increase competition with European settlement market removing monopolistic national barriers. 20 Markets harmonization Assets can be moved timely and freely London Stock Exchange Group Page 3

4 LSEG - The offering of CSD services Monte Titoli - Italian Issuer CSD (based in Milan) - 3rd CSD in Europe with over 3,4 trillion assets - New strategy to become an investors CSD for T2S markets - Complete Pre-settlement, settlement, custody, asset servicing - Launch new value added services: triparty collateral management platform globesettle - Authorised in Lux in Investor CSD as a start. - Operating 22 hours out of Introduction of the Collateral Day concept - Services offered to tri-party agents, CCPs, Lenders and Central Banks - First Client JPMorgan (onboarding in progress) The two CSDs can leverage on the IT platform, Network and Operations of Monte Titoli London Stock Exchange Group Page 4

5 Margin OTC derivatives Settlement Stock lending Margin OTC derivatives Settlement Stock lending Utilized Not Utilized Utilized Not utilized Portfolio optimization and liquidity centralization Highly fragmented Internal Effective use Internal Assets Assets Assets T2S Under pressure Centralisation of securities and liquidity Collateral Management X-COM Exploit the whole portfolio External London Stock Exchange Group External Page 5

6 The role of a Triparty Agent Collateral Giver Collateral Receiver Selection of collateral Verification of eligibility Valuation Valuation Transfer of collateral Mark-to-market Management of Corporate Actions Collateral substitution according to the agreement Restitution of funds TRIPARTY AGENT Transfer of liquidity Mark-to-market Management of Corporate Actions Risk management (concentration limits, close links, rating check) Restitution of assets London Stock Exchange Group Page 6

7 X-Com Triparty Collateral Platform Strategy Strength relationship with existing and new clients Increase revenues Next enhancement will include: Securities Lending Margin management for CCPs Collateral Transformation OTC Clearing Simplification in back office Minimize risk Full control on securities portfolio Full outsourcing of the management of financing operations and collateral Sophisticated\Customized tools to control risks (hair cuts, eligibility criteria, margin calls, concentration limits, close links) Recall and automatic substitution of securities in collateral Optimised use of collateral Customized selection of collateral based on rating and size London Stock Exchange Group Page 7

8 Introducing Triparty contract in the domestic market X-com launched in Sept Major enhancement in May 2015 when the service was extended to the management of OTC and On-Exchange repo trades CC&G (Italian Central Counterparty) has launched ECB denominated repo basket), a central clearing service for the triparty repo market. The Repo Basket contract is traded in MTS and E-Mid and Monte Titoli is the tri-party agent. Monte Titoli automatically selects collateral composed by Government, Corporate bonds and ABS which are ECB eligible and ratings not lower than investment grade

9 This publication contains text, data, graphics, photographs, illustrations, artwork, names, logos, trade marks, service marks and information ( Information ) connected with Monte Titoli S.p.A. ( Monte Titoli ). Monte Titoli attempts to ensure Information is accurate, however Information is provided AS IS and on an AS AVAILABLE basis and may not be accurate or up to date. Information in this publication may or may not have been prepared by Monte Titoli but is made available without responsibility on the part of Monte Titoli. Monte Titoli does not guarantee the accuracy, timeliness, completeness, performance or fitness for a particular purpose of the publication or any of the Information. No responsibility is accepted by or on behalf of Monte Titoli for any errors, omissions, or inaccurate Information in this publication. This publication does not represent solicitation, by Monte Titoli, of public saving and is not to be considered as a recommendation by Monte Titoli as to the suitability of the investment, if any, herein described. No action should be taken or omitted to be taken in reliance upon Information in this publication. We accept no liability for the results of any action taken on the basis of the Information. March 2014 Monte Titoli S.p.A. London Stock Exchange Group All rights reserved