Substantial balance sheet consumption from repo trading continues to constrain banks and broker-dealers and limits their ability to provide clients with liquidity.
In response, Clearstream and Eurex have made several enhancements in their trading, clearing and settlement infrastructure and processes to deliver an innovative solution that places repo trading customers in the best possible position to achieve balance sheet netting and benefit from the highly liquid and flexible GC Pooling Triparty repo market.
Lower capital costs
The completion of this initiative marks a major milestone in Clearstream’s and Eurex efforts to deliver capital efficiencies for participants in the European repo market landscape.
In this whitepaper, Eurex and Clearstream present a high-level overview of the GC Pooling and Special Repo markets as well as its growing interlinkage and the inefficiencies resulting from the inability to achieve netting. The paper shows a qualitative overview of the accounting standards for achieving balance sheet netting and reviews the solution against the accounting standards. To best illustrate potential benefits the paper closes with a European Broker Dealer case study highlighting the potential benefits to be achieved by the employing the new Balance Sheet Netting solution
Enhancing collateral mobility
By enhancing collateral mobility and credit efficiency for post-trade market participants, Clearstream continues to improve access to liquidity and to securities financing markets across the Eurosystem.