Eurex Clearing announced the launch of a solution enabling the delivery of margin collateral using distributed ledger technology (DLT) infrastructure, which can be expected to boost the flexibility, speed, and efficiency of securities collateral mobilization.
The model was designed together with HQLAX and Clearstream Banking Luxembourg (CBL) to enable margin and default fund allocation by mobilizing securities collateral from other custodians to CBL using the HQLAX DLT platform. The model is envisaged to be used for margin collateralization of clearing members’ own or clients’ exposures to Eurex Clearing. Liabilities and obligations of CBL as collateral location vis-à-vis Eurex Clearing remain the same.
“This innovative initiative marks a significant milestone in the digital transformation of collateral management, enabling near-instantaneous access and utilization of securities collateral – regardless of its physical location – to meet margin requirements set by the CCP,” Eurex Clearing wrote in a circular.
The solution has received a non-objection from BaFin, the German Federal Financial Supervisory Authority, confirming compliance with regulatory standards and paving the way for a secure and legally sound implementation of DLT in collateral processes.
The HQLAX DLT platform, which includes Clearstream International (CI) functioning as a trusted third party, employs CBL as a sub-custodian to enable the collateral mobilization from the custodian of choice for the relevant clearing members. The clearing member uses the HQLAX DLT platform to receive securities on its own collateral account at CBL. This ensures that the collateral can be utilized to cover its margin and/or default fund obligations vis-à-vis Eurex Clearing.