- LCH SA, the European CCP based in Paris, has merged its core RepoClear Euro debt service with its general collateral €GCPlus service to provide alternative channels to access GC liquidity
- The new combined service enables a unique point of access to the world’s largest Euro cleared liquidity pool with clearing members benefitting from a single membership, default fund and set of margins, and further netting opportunities
- The service went live on 3 July 2023
LCH RepoClear SA announced that it’s merged its RepoClear Euro debt service, which includes specials and general collateral, with its €GCPlus service, a general collateral tri-party basket repo clearing service. €GCPlus was initially launched in 2014 in collaboration with Euroclear and Banque de France. This delivery further builds on LCH SA’s global multi asset class services.
The two services previously operated separately but by removing these silos, €GCPlus liquidity will be merged with the €3.3 trillion RepoClear liquidity pool at LCH SA to unlock additional netting opportunities for members. It will enable quick and easy access to secured liquidity and enhanced collateral management capabilities. The merger also creates alternative routes to access liquidity in the general collateral segment through the world’s largest Euro cleared liquidity pool.
Members will now benefit from cost reductions through payment into a single default fund, where previously it was two. Further operational efficiencies include the introduction of one set of margin calls and reports across the combined services. Clearing members will also be able to easily lend specific securities and recycle the cash proceeds into €GCPlus, thus reclaiming their asset inventory, in one single ecosystem.
RepoClear SA anticipates a growing number of financial institutions to benefit from access to a single liquidity pool driven by a number of factors. Firstly, government debt issuance has increased, with no relaxation of the balance sheet constraints of institutions that intermediate in the market. RepoClear can ease those resource management pressures through its Sponsored Clearing model, allowing buy side access to cleared liquidity and releasing resource capacity for banks.
Furthermore, from June 2023, EU pension scheme arrangements (PSAs) were required to clear interest rate swaps which has led to greater collateral transformation needs as a result of the requirement to post cash as variation margin at the CCP. This can be facilitated through access to RepoClear SA’s single liquidity pool.
Emmanuel Rolland, COO for Collateral and Liquidity Management (CaLM) at RepoClear, said in a statement: “We are delighted to build on our long-standing collaboration with Euroclear and Banque de France, to offer the sell side and buy side alternative access to general collateral liquidity and the world’s largest Euro cleared pool with enhanced collateral management capabilities.
“The merger of our two services means that financial institutions will benefit from even greater netting opportunities, reduced margin requirements, and harmonized reporting and operational processes. The benefits of access to cleared liquidity and robust risk management have never been more apparent given recent market events and we look forward to working with financial institutions as they look to RepoClear for that support”.
Olivier Grimonpont, managing director and head of Product Management for Market Liquidity at Euroclear, said in a statement: “This merger is the natural evolution of the service which has seen growing interest from fixed income and treasury desks and other key market participants to manage Eurosystem-eligible collateral efficiently and to generate liquidity in a cleared environment. By combining these solutions, LCH RepoClear are able to offer an efficient and truly robust solution to clients utilizing the strengths of our long standing partnership. We are extremely pleased to be taking this next step with LCH and Banque de France and to continue to support the market.”