DTCC announced that six dealers have signed up for the firm’s Margin Transit Utility (MTU) collateral settlement infrastructure. The six dealers are Goldman Sachs, J.P. Morgan, Morgan Stanley, Societe Generale, UBS and Wells Fargo.
MTU straight-through-processing is designed for the transfer of collateral among market participants, by centralizing communications and settlement instructions. The service includes connectivity from AcadiaSoft’s MarginSphere and ALERT for standing settlement instructions (SSIs), connectivity to custodians and triparty providers, confirmation of settlement, and standardized reporting.
GlobalCollateral was established to help firms address an array of collateral- and liquidity-related needs that have become more acute in recent years as regulatory mandates have extended their reach. Specifically, mandatory clearing of standardized derivatives and new margin requirements for non-centrally-cleared derivatives are boosting the number of margin calls.
This activity is stressing traditional manual processes and creating the need to simplify collateral settlement processing and optimize the use of collateral. Furthermore, collateral mobility across borders and within the U.S. domestic market is needed to match global demand for high-quality liquid assets.
The six dealers join over 30 firms, including investment managers, administrators and custodians such as Vanguard, Franklin Templeton and BBH.
“We see MTU as an important utility solution to address challenges related to the manual processing of collateral settlements as well as the expected increase in volumes and frequency,” said Joseph Spiro, NY head of Collateral at Societe Generale, in a statement. “Manual processes and scalability challenges are prevalent across the industry, and MTU will help to automate triparty and bilateral margin calls for both segregated and non-segregated accounts to better support clients and reduce settlement fails.”
“Calculating margin calls, generating and affirming calls and determining eligible collateral, and then instructing our custodian with real-time settlement updates and end-of-day position reporting, will significantly reduce operational, counterparty and liquidity risks,” said John Montgomery, senior specialist, Global Collateral at Vanguard, in a statement. “Leveraging MTU in conjunction with AcadiaSoft’s MarginSphere and our collateral management system will greatly increase our overall collateral management efficiency beginning with OTC derivatives and then later for TBAs, ETDs and OTC cleared derivatives.”