Lombard Risk is enhancing its capabilities across triparty agents through a new partnership with international central securities depository and settlement and custody firm Clearstream. This cooperation comes ahead of the regulatory deadline for Initial Margin requirements Phase 3 under the European Market Infrastructure Regulation (EMIR) in September and other jurisdictions.
EMIR aims to increase transparency in exchange trading and reduce systemic counterparty as well as operational risk within the international financial system.
The new legislation requests all standardised derivatives contracts to be cleared through central counterparties. In addition, large parts of OTC trading will have to be settled on a collateralised basis and reported to central trade repositories.
The next phase of margin requirements will require counterparties to exchange two-way initial margin on a non-netted basis for uncleared derivatives exceeding €1.5 trillion. This puts additional pressure on tier 2/3 size firms to get their collateral management solutions in place. The necessary collateral must be segregated at a non-affiliated third-party custodian or triparty agent, such as Clearstream.
With this partnership Lombard Risk’s collateral management clients will gain access to Clearstream’s triparty collateral management services, bringing together more opportunities for real-time collateral mobilisation in order to improve liquidity on a global basis. This will further improve collateral efficiency, enabling a straight-through collateral management process across all asset classes, promoting data accuracy and increasing visibility of the collateral management lifecycle on a global basis.
The new triparty connection will furthermore allow joint customers of Clearstream and Lombard Risk to leverage their triparty collateral management activities in regards to repo, securities lending and borrowing and access to central bank money collateralisation at a Eurosystem level.
Helen Nicol, Global Product Director, Collateral Solutions, Lombard Risk, said: “This new triparty connection enriches connectivity through our flagship collateral management solution, COLLINE, and will enhance our clients’ experience and choice. Clearstream is a leader in this field and enables our customers to further increase their collateral efficiency and accuracy through real-time STP connectivity.”
Jean-Robert Wilkin, Head of Market Development, Global Funding and Financing (GFF) at Clearstream Banking S.A. stated: “We always strive to further increase collateral efficiency in the market. This partnership allows our sell and buy-side clients to benefit from simplified access to an STP collateral management process and to leverage a single collateral pool, while re-using netting opportunities across both cleared and uncleared segments across multiple jurisdictions.”