Clearstream and Citi partner in collateral management

Clearstream and Citi have formalised their plans to a customised tri-party collateral management solution that Citi will offer to its customers. The two companies have now signed a Letter of Intent to move ahead with their collaboration to enable joint customers to benefit from Clearstream’s award-winning Global Liquidity Hub, an integrated suite of collateral management and securities lending services.

The Liquidity Hub Connect service will enable Citi customers to consolidate their collateral holdings for use within the Global Liquidity Hub in order to gain efficient coverage of their global exposures from a single optimised collateral pool. The service delivers twofold benefits as customers retain their asset portfolios within Citi’s extensive custody network while Clearstream’s collateral management engine carries out the complex collateral management functions such as automated optimisation and substitution.

Improving access to collateral, particularly those balances held domestically, is seen as a crucial issue for the financial industry at a time when regulators drive demand for optimisation as well as adequate levels of capital and liquidity. Accordingly, an important and unique feature of Clearstream’s Liquidity Hub Connect is that it mobilises collateral in real time and only up to the amount that is required. As a result, it allows Citi’s clients to use their entire available inventory intelligently, but without putting their domestic trading and financing activities at risk.

Jeffrey Tessler, CEO Clearstream, said: “I am delighted to have Citi as a partner for the further extension of Clearstream’s comprehensive liquidity pool. Liquidity Hub Connect will enable Citi to offer its customers the unique advantages of our collateral management services, which are widely acknowledged as the best in the industry and which continue to develop. We’ve been on the fast lane with these services for a number of years now and the open architecture of the Global Liquidity Hub means our collateral pool continues to broaden and deepen, while we continue to deliver collateral management services that are exceptionally user-friendly – and live.”

Sanjiv Sawhney, EMEA Head of Securities and Fund Services at Citi, added: “We are delighted to form an alliance with a leading tri-party agent such as Clearstream to provide our mutual clients with a solution that improves collateral optimisation across all asset classes and creates significant efficiency gains. This alliance further demonstrates Citi’s commitment to developing an open architecture that enables our clients to access liquidity pools seamlessly and eliminate collateral fragmentation.”

This latest evolution of Liquidity Hub Connect is a natural extension to the concept of Clearstream’s outsourced, white-labelled Liquidity Hub GO (Global Outsourcing) initiative, which is already live with Brazilian CSD Cetip and is at various stages of development with four other financial infrastructures around the world: ASX in Australia, Strate in South Africa, CDS in Canada and Iberclear in Spain.

Clearstream customers also benefit from its unique position within Deutsche Börse Group and its integrated business model. Having a central counterparty within the same group – Eurex Clearing – enables the companies to deliver services such as the industry-leading and unique GC Pooling service, a tri-party repo-style service secured in central bank money. This service is being developed further with GC Pooling Select which will enable corporates to join GC Pooling as cash providers.

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