Clearstream Global Liquidity Hub Newsletter New agency services 16 /

Customers can now benefit from agency lending services as part of the Global Liquidity Hub’s strategic securities lending suite. A partnership with Eurex ’s lending CCP 0 1 provides customers with the additional safety of centrally cleared trading.

Agency lending via a central borrower and the lender via the counterparty (CCP) such as Eurex SecLend market (offered by Eurex Clearing is an attractive means of Repo). An experienced distribution enhancing yield through strategic team negotiates the best possible rates lending while minimising credit and with borrowers to ensure attractive systemic risk since the CCP is the legal lending conditions. counterparty to all . The service is perfectly suited to large lenders who Once the trade is agreed, ’s are looking for secure, regulatory- Global Liquidity Hub performs all compliant strategic lending solutions. the necessary administrative and operational steps, including account Fully integrated movements, recalls, returns, rerates, income events, corporate actions and securities lending reporting. As a neutral agent, Clearstream arranges the loans between the 2 | Global Liquidity Hub Newsletter

Standard agency Securities lending for central banks lending The agency lending service via a CCP Central banks worldwide actively encourages national central is part of an entire suite of securities have been using Clearstream’s banks to reinject the securities into the lending services under the Global principal securities lending market via securities lending. Liquidity Hub. Customers can also benefit from standard agency securities service ASLplus to lend their Clearstream’s securities lending lending services without a CCP. foreign reserves since 2006 – services under the Global Liquidity 10 of the top 15 lenders in Hub are the ideal tool for Eurosystem The standard service gives lenders full ASLplus are central banks. central banks to meet this ECB control of the risk – they select their mandate. For example, Clearstream’s counterparties, set eligibility automated securities lending and criteria and impose tailored credit and The Global Liquidity Hub has become borrowing (ASL) and strategic securities concentration limits. Lenders can carry an even more attractive tool for central lending (ASLplus) programmes are the out more structured trades compared banks to increase liquidity in capital lending services of choice of Deutsche to other securities lending services. markets under the European Central Bundesbank, Banca d’Italia and Latvijas Bank’s quantitative easing programme. Banka for securities purchased under Customers can maximise the use of The Public Sector Purchase Programme the PSPP. their assets and the associated yield (PSPP) was recently extended: national by signing up to the entire securities central banks can now purchase up to Since December 2015, central banks lending suite of the Global Liquidity 33% of domestic shares per ISIN. This can also choose the new agency Hub. In addition to the agency increases the pool of assets that can securities lending service via CCP for securities lending services, lenders be purchased by central banks and this purpose. The service is offered can also benefit from the principal lent out. jointly by Eurex Repo, Eurex Clearing securities lending service (ASLplus) and Clearstream. to increase portfolio yield. Assets can To avoid the creation of a collateral also be distributed via the automated shortage through this significant securities lending service (ASL) to withdrawal of high-quality liquid assets cover fails as a last resort. (HQLA) from the market, the ECB

Securities lending for fund managers

Clearstream’s KAGplus lending activities under Clearstream’s service enables investment KAGplus securities lending programme management companies comply with these regulations. such as UCITS, AIF and their A unique legal framework custodian banks governed by The KAGplus lending programme German law to maximise the has a special legal framework with use of their assets through more standardised and streamlined rules for subscribers. This is possible securities lending in full due to Clearstream’s unique status of compliance with new UCITS organised system which has recently and ESMA rules. been reconfirmed by the German financial regulator BaFin.

While securities lending is a useful As Clearstream is the only provider tool for UCITS and AIF fund managers with this status, KAGplus is the to increase their performance, only securities lending service on stringent UCITS and ESMA rules the market which is exempt from restrict these activities in the interest counterparty concentration limits or of investor protection. However, all collateral segregation requirements. Global Liquidity Hub Newsletter | 3

Collateral management improvements with T2S

Clearstream will offer harmonised New features and securities lending services for CSD and ICSD customers The Global Liquidity Hub will also be once Clearstream joins TARGET2-Securities (T2S). Customers enhanced with new features in the run-up to T2S. An automatic sweep will be able to pool their assets, including equity, at the CSDs functionality will enable customers in Germany and Luxembourg, making them their gateway to to move their CSD assets to the ICSD T2S for use in the ICSD’s securities lending and collateral to benefit from the ICSD’s more management services. For example, it will be possible to advantageous operating hours. Customers can benefit from the sweep conduct triparty repos with commercial and for collateral management using their money with CSD assets. own assets as well as for triparty repos and collateral re-use.

Full triparty interoperability repos in central bank money using To keep customers’ settlement costs to Once Clearstream joins T2S, there will assets under custody at the CSDs a minimum for the automatic allocation be full triparty interoperability between Clearstream Banking AG in Germany of collateral in the Global Liquidity Hub, Clearstream’s CSDs and the ICSD. and LuxCSD in Luxembourg. Clearstream is introducing a “same This will result in improved liquidity settlement system first” rule. This management while customer can It will also be possible to use the assets ensures that assets in the same optimise collateral use across their pooled at the CSDs for triparty CCP securities settlement system (CSD entire European asset pool. At the margining, CCP-cleared repos and or ICSD) will be given priority in the moment, it is not possible to use CSD the collateralisation of OTC derivatives collateral allocation over assets of a assets to collateralise triparty repos, amongst other things. The aim is similar collateral quality in another the assets have to be transferred to the to have full triparty interoperability system. ICSD manually and it is only possible across the Clearstream CSDs and to perform triparty repo in commercial the ICSD which will be performed by bank money. However, under T2S, it a single, state-of-the-art collateral will also be possible to conduct triparty management system. 4 | Global Liquidity Hub Newsletter

New online connectivity for collateral management

The collateral management Business Monitoring Centre to react to market changes in the module on the Xact Web The Xact Web Portal now also includes current fast-paced environment. Portal gives customers a business monitoring tool, which can The new baskets are available for be tailored to customers’ needs to all collateral management services a clear, comprehensive ensure each exposure is collateralised under the Global Liquidity Hub. overview of their ICSD in an optimal manner. Customers can collateral management with schedule queries at defined intervals Full transparency the Global Liquidity Hub. and receive email alerts based on In addition, collateral receivers are different triggers, for example, when an now able to view all their collateral exposure is under-collateralised above profiles throughout the entire lifecycle Since November 2015, this new a set threshold or when trades remain of a trade, while collateral givers connectivity solution offers customers unmatched after a certain period of have a consolidated overview of enhanced features in addition to long- time. eligibility criteria and concentration established online functionalities such limits for all contracts signed with as exposure view, instruction creation Rule-based collateral baskets their counterparties. This results in and MIS reporting. All information Since November, ICSD customers greater transparency as all impacted is readily available at a glance and in have also been able to create bespoke, parties will have access to up-to-date real-time. rule-based collateral baskets. This information. unprecedented level of customisation Trade simulation tool not only offers the greatest flexibility to The ClearstreamXact connectivity One new feature is a trade simulation react swiftly to market developments solution will give customers a single tool which uses live data to display but also ensures that the baskets point of access to the full range of ICSD trading capacity. The tool not only mirror customers’ risk profiles as and CSD services with T2S once the bases the simulation on assets held at precisely as possible. common European settlement platform Clearstream, it also enables customers has been fully implemented. to import external portfolios to their By freely mixing and matching all account. This unique service gives available parameters for collateral customers an overview of all assets, eligibility, haircuts and concentration even those held at other custodians limits, customers can fine-tune their around the world. risk profiles to the highest degree. This makes it easier for customers Global Liquidity Hub Newsletter | 5

Services in support of EMIR compliance

Upcoming regulations New legal agreement OTC Collateral: Bilateral collateral such as EMIR will In addition to this advantageous management outsourcing introduce additional operational setup, customers will also EMIR not only requires the posting benefit from a simplified legal setup and segregation of initial margin, requirements on uncleared for the collateralisation of internal it also imposes the exchange of derivatives to reduce margins. variation margin on net basis between systemic risk. As a result, all market participants. Clearstream’s both financial and non- Following the success of the OTC Collateral service enables Clearstream Repurchase Conditions, customers to outsource the overall financial counterparties will customers will soon be able to collateralisation of all their be required to post initial choose a similar legal agreement for exposures to the Global Liquidity Hub. margin on a two-way gross collateral pledges to cover their initial basis. margin requirements under EMIR. The service covers all aspects of This multilateral margin agreement, bilateral collateral management the Clearstream Pledge Conditions, from CSA review and administration, Initial margin segregation via triparty only needs to be signed once by mark-to-market, margining, collateral management each customer to be valid for all dispute management and portfolio The necessary collateral must be counterparties who have signed it. reconciliation to payment and segregated at a non-affiliated third settlement follow-up as well as party custodian or triparty agent such Essentially, the Clearstream Pledge reporting. The collateral received from as Clearstream. This will significantly Conditions set out a common bilateral transactions through the OTC increase the amount of collateral framework for the core terms Collateral service can be readily needed for OTC derivative trading and governing the exchange of initial reused within the triparty environment will put pressure on counterparties to margin. Additional terms such as of the Global Liquidity Hub. mobilise collateral more efficiently. eligible collateral, haircuts and Clearstream customers can concentration limits can be tailored their existing setup for triparty to each counterparty on a bilateral collateral management services under basis. the Global Liquidity Hub for meeting these margin requirements. As a neutral agent, Clearstream already has the necessary operational structures in place for segregating initial margin collateral for both cleared and uncleared transactions.

Clearstream’s account structure enables customers to hold multiple currencies and asset classes in a single location. Initial margin will be held in segregated accounts under a pledge structure in line with regulatory requirements. In addition to their fixed income assets, customers looking to diversify their eligible collateral can include equities and money market funds. This single collateral pool effectively bridges bilateral and triparty trades to reduce inefficiencies from collateral fragmentation.

In addition, customers will benefit from collateral transformation and reinvestment opportunities. 6 | Global Liquidity Hub Newsletter

GC Pooling update

We are constantly expanding Eurex Repo provides the trading In addition, the GC Pooling INT MXQ our GC Pooling services platform, Eurex Clearing clears the basket has been extended to non- globally to significantly trade and Clearstream performs the sovereign and non-supranational bonds settlement and collateral management. from issuers such as credit institutions increase the cross-border Customers can choose from a wide (covered bonds) and regional use of assets. Recent selection of standardised fixed income governments mainly from outside the service upgrades include and equity collateral baskets as well Euro area. This enlarges the basket by the extension of the range of as baskets of ECB-eligible securities, around 1,700 securities with an issued which can be reused directly to access volume of about EUR 3,5 trillion. eligible bonds as collateral Eurosystem credit facilities. and the possibility of USD In addition to this broader range of overnight trades. Extended collateral eligibility eligible assets, the baskets have One of the latter baskets, GC Pooling also been rendered more attractive GC Pooling offers a user-friendly ECB EXTended, now also includes thanks to the introduction of additional electronic platform for secured money Italian, Irish and Spanish covered bonds services for USD. For example, USD market trading on an anonymous issued by credit institutions as well as overnight terms are now possible in basis for EUR, CHF and USD funding. bonds issued by regional governments. the GC Pooling market with both Customers are provided with a single This means that 500 additional Italian, baskets mentioned above as well as point of access to straight-through Irish and Spanish securities are now with the GC Pooling ECB basket. processing services from several eligible as collateral for triparty repo Deutsche Börse Group entities: trades in GC Pooling.

Collateral management for secured instruments

Secured instruments have posts collateral via Clearstream’s collateral management engine gained popularity since the Global Liquidity Hub in the CSD or automatically allocates and substitutes financial crisis. Clearstream ICSD environment to cover the value of the collateral and provides customers the issue at all times as defined in the with comprehensive reporting. is registering a growing ’s prospectus. Clearstream acts interest of issuers in collateral as a neutral fiduciary agent on behalf Collateral management for secured management services for of the investor and blocks the collateral instruments is an attractive service for this growing asset class. to protect the investor in the event of a both issuers and investors: investors by the issuer. benefit from lower risks and issuers attract a larger pool of investors. Secured instruments are a As the collateral is allocated in The service is increasingly popular, for collateralised form of issuance. Once real time, the issuer only needs to example, BNP Paribas recently chose it the instrument has been issued via collateralise the portion of the issuance for a secured issuance programme Clearstream’s German CSD, the issuer that is sold to investors. Clearstream’s in the German market.

Risk management for Eurosystem collateralisation

The European Central Bank determines As a risk control measure, Banque Centrale du Luxembourg which assets are eligible for use haircuts are currently applied to and Deutsche Bundesbank will as collateral in Eurosystem credit eligible assets, depending on the type provide Clearstream’s ICSD and CSD operations. For example, a Eurosystem of collateral, residual maturity, credit respectively with a list of affected counterparty may not submit any assets quality and coupon structure. Going securities on a daily basis, enabling issued or guaranteed by itself or by an forward, the Eurosystem will also Clearstream to apply the valuation entity with which it has close links. provide an additional valuation haircut haircut depending on the type of the for covered bonds eligible for own use. securities. Global Liquidity Hub Newsletter | 7

Staff news

Aurélie Basso Filipe Branco After four years in the securities Filipe has been a GSF Sales and lending team, Aurélie took up a Relationship Manager for Southern new position as Head of Product Europe and The Netherlands since July Philippe Seyll Management for Securities Lending 2015. Prior to taking up this position, he Philippe Seyll was appointed Head in October 2015. Her team covers fails spent over six years in GSF Operations of Global Securities Financing at and strategic lending, including the and another four years in other Clearstream in November 2015. Going recently lauched agency lending service operational units within Clearstream. forward, Philippe aims to further with Eurex Clearing. Her previous This diverse operational background extend the reach of the Global Liquidity positions at Clearstream include Head enables Filipe to advise customers on Hub by strengthening partnerships of GSF Lending Operations and she all Global Liquidity Hub products and with market infrastructures, local also spent a few months in Singapore services. and global depositories as well as to set up the new GSF Operations desk electronic trading platforms. He will in 2010. also focus on improving services for the US and Asia and will ensure customers get the most out of T2S thanks to unique collateral pooling opportunities with Clearstream.

Philippe is co-CEO and Member of the Executive Board of Clearstream’s ICSD. In addition to Global Securities Financing, he is responsible for Investment Fund Services. Philippe is also Chairman of LuxCSD, Clearstream and BCL’s joint CSD in Luxembourg.

Prior to joining Clearstream in 2005, Philippe was Managing Director, Head Claire Collard Anne-Kathrin Hasdorf of Investment Managers, at Bank of Claire joined GSF Sales in January 2015 Anne has been managing securities New York, London. Previous positions as a Documentation Assistant. She lending products offered by include Head of Sales and Marketing ensures a smooth documentation flow Clearstream’s CSD in Germany since for Europe at Banque Indosuez, for new and existing customers, from August 2015. Prior to joining the GSF Luxembourg, and Relationship onboarding to amending contractual product management team, she had Manager for France, Belgium and arrangements. She liaises closely worked in customer service since Luxembourg at SWIFT. Philippe also with GSF Operations. Before joining 2008 and later supported T2S-related sat on the EFAMA Board. GSF, Claire worked as a Junior Tax and client onboarding projects. Administrator in Clearstream’s Tax With Clearstream’s support, she Philippe holds a Master of Science in department. recently completed a MSc in Banking Management, Computer Science and and Finance at the University of Mechanical Engineering. Luxembourg. 8 | Global Liquidity Hub Newsletter

Xavier Isnard Elisa Poutanen Matthieu Topkimoff Xavier joined the GSF team in Elisa joined Clearstream’s GSF Matthieu joined GSF Sales in March December 2014 on the ASLplus Continental Europe Sales team in 2015 as a Relationship Support Officer securities lending desk as a trader. August 2015 to cover Nordic markets for the Benelux and Nordic countries Xavier’s primary role is to distribute as well as Belgium, Luxembourg and as well as Switzerland. Prior to this, he the lendable assets that are part of our Switzerland. worked in GSF Operations on the repo ASL and ASLplus programmes. Prior and securities lending desks. Matthieu to this position, Xavier worked as part Before joining Clearstream, Elisa holds a MSc in Finance from Coventry of the interbank structured products spent twelve years with BNP Paribas University. sales team at Société Générale in Securities Services in Paris. She held London for two years. He holds an various positions in custody, treasury MSc in Economics and Finance from and market services, including the Panthéon-Assas University of Paris and management of client service and an Advanced Master degree in Market business development support teams. Finance from ESCP Europe business school.

Market-leading triparty services

The Global Liquidity Hub once again The Global Custodian magazine received top scores in industry survey yielded similar results with surveys. In the triparty survey by Clearstream exceeding the survey Global Investor magazine, Clearstream average on all questions. Clearstream achieved the highest global and EMEA was particularly commended for its score when all respondents were “impressive ability to get to grips with considered, leading the magazine to what clients want”. describe Clearstream as “the standout performer of the 2015 survey”.

Contact information

For further information on our Luxembourg +352-243-36868 Global Liquidity Hub services, Frankfurt +49-(0)69-211-12757 please contact our dedicated London +44-(0)20-7862-7142 GSF team. Singapore +65-6597-1622 Hong Kong +852-2530-7404 [email protected] Dubai +971-4-359-9333 www.clearstream.com New York +1-212-309-8885

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