The Eurosystem needs to accelerate the circulation of collateral within the euro area and allow more players to meet, said François Villeroy de Galhau in a recent speech (translated from French), referencing a greater opening of the collateral market, for asset managers in particular. With the support of the banks and Euroclear, as well as LCH SA and asset managers in the future, the central bank is “continuing the construction in Paris of a new collateral management ecosystem,” he added.
de Galhau announced that the Elixium platform started its activities on the Place de Paris on May 14 with a first transaction of €750 million to which the central bank was a counterpart, calling it an essential tool towards such goals. BNP Paribas is also using Elixium for euro tri-party repo trade, settled by Euroclear. Eugene McGrory, Head of Rates Repo, Global Markets, BNP Paribas, said: “We are pleased to be able to utilise the Elixium marketplace to carry out some of our repo trading activities with the Banque de France”. Since then more trades have happened and three more participants have joined, according to Gabriele Frediani, chief business development officer, head of business development and international at Elixium cited in Securities Lending Times.
“We must also see the emergence of an electronic trading tool enriched with advanced features; for example, to allow the exchange of individual securities against standard collateral baskets or to allow the exchange of liquidity in dollars against standardized baskets of securities in euros. In addition, these exchanges must be able to be fully automated, tripartite, depending on the legal regime of the pension delivered as currently, or directly in the “title-for-title” mode as in bilateral transactions. In order to secure the transactions, a compensation solution will have to be made available for the participants who wish it.”
de Galhau also discussed Brexit, advanced technologies such as artificial intelligence and blockchain, and the European Collateral Management System project. The ECMS “will provide a unified platform for the management of conventional monetary policy operations and related collateral developed by the Banque de France and the Bank of Spain. It will contribute significantly to the unification of capital markets within the euro area, and to the harmonization of market practices, beyond monetary policy activities (tripartite collateral management, management of securities transactions, etc.) and it is a simplification vector for monetary policy counterparties with identical access conditions and simplified cross-border collateral management,” he said.