€gcplus taking secured financing to the next level olivier de schaetzen – alexandre gautier –...
TRANSCRIPT
€GCPlus Taking secured financing to the next level
Olivier de Schaetzen – Alexandre Gautier – Nicolas VincentEuroclear Collateral ConferenceTuesday, 13 May 2014
Introduction to €GCPlus
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The partners and the productThe post trade partners
Banque de France
• As initial sponsor of the product
LCH.Clearnet
• Is the largest clearing house for fixed income trades and repos in Europe.
• More than €280 Bn of transactions managed on a daily basis on those transactions
• Over 80 participants
Euroclear
• Is the largest collateral house in Europe with over €850bn collateral managed daily for commercial banks, investment banks, central banks, corporate and asset managers
• Over 250 participants
An innovative solution
• Secured euro cash funding with standardized baskets of collateral
• Anonymous trading with netting exposure by LCH.Clearnet SA, offering robust risk and default management
• Embedded within a fully interoperable collateral system between Euroclear Bank and Euroclear France / ESES giving you access to a large counterparty base
• Full re-use possible in triparty collateral management with market counterparties and Eurosystem
• Optimum liquidity management► DVP settlement throughout the chain
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The value chain
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Electronic platforms ICAP, MTS, Tullet
Prebon
€GCPlus Clearing participants
LCH.Clearnet
National Banks (Banque de France...)
AutoSelect
Euroclear Bank/ESES
Euroclear
Trading
Clearing
Collateral Management /Settlement custody
Central Bank
• Anonymous cash-driven trading via e-platforms• Trading of two baskets covering a large set of ECB-eligible securities
• Intermediation of the CCP reducing the regulatory capital cost• Exposure netting at clearing level
• Automated collateral management provided by Euroclear in a truly interoperable collateral management environment• Full possibility of collateral re-use• Optimum liquidity management: DVP settlement throughout the chain
• Refinancing with Eurosystem and, initially, with Banque de France• Expansion to other central banks is ongoing
Product features
€GCPlus
Repo rate Fixed
Maximum term 367 days
Minimum term Same day
Maximum forward start 10 days
Repo rate accrual convention Exact/360
Repo interest paid Return date
Minimum contract size €1 million
Order books BrokerTec MTSTullett Prebon
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Trading platforms Access to €GCPlus
Trading platforms offer treasurers and repo desks• Anonymous trading• Open architecture• Order-driven marketplace with price transparency• Deep liquidity pool• Fully automated end-to-end post trade processing• Daily web reports (public & private) of trading data
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LCH.Clearnet brings:
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• The return of the collateral to the cash borrower• The reimbursement of the cash to the cash lender• The payment of the Triparty Repo Interest based upon the nominal value of
the repo to the cash lender
• Register trades upon confirmation by the platform• Novation of trades and calculation of a Net position exposure per basket• Live reporting through the whole process• Robust risk management and low regulatory capital cost
LCH.Clearnet SA
LCH.Clearnet SA guarantees
Euroclear brings:Triparty interoperability
• Cash borrowers will settle against LCH.Clearnet using their main collateral account, irrespective of the location of the counterparty’s collateral account
• All transactions settle DVP• Substitutions are executed across the
two settlement platforms
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Collateral Management System (CMS)
LCH.Clearnet SA
Euroclear Bank ESES
Scenario 1
Scenario 3
Scenario 4
Scenario 2LCH CCT
LCH C CTCG
CG
4 scenarios for net settlement
across the two
platforms
€GCPlus trading day
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Start of Day CCP End of Day CCP
8:00 18:309:00< 6:00 14:0013:00
4:30 6:00 7:00 8:00 9:00 10:00 11:00 12:00 12:45 13:30 14:25 15:30 16:30 17:45
Euroclear Bank
Euroclear France
Euroclear collateral Management
12:00
Same Day net positions
Next day net position
Settlement
Trade collection
Settlement (DVP) - Target2
16:00
Trading platforms Trading
10:0011:00 15:00
LCH.Clearnet
2:00 3:15
Daily MarginPayment
Intraday MarginPayment
FoP
Central European Time (CET)
18:20
LCH.Clearnet
Triparty intra-operabilityESES foreign debt extension of scope
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Further• Finland (EFI)• Portugal (Interbolsa)• Spain (Iberclear)
In 2014• Austria (OeKB)• Greece (BoG)• Ireland
Today• Belgium (NBB-SSS)• Euroclear Bank (XS)• France (EF)• Germany (CBF)• Italy (Monte Titoli)• The Netherlands (EN)
Collateral eligibility• Assets are ECB-eligible• Held by Euroclear Bank through ECB-eligible links• Relayed link between ESES and Euroclear Bank is ECB-eligible
Two liquid collateral basketsBaskets based on liquid income instruments eligible for Eurosystem’s monetary operations
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• High Quality Liquid Assets• ECB liquidity classes L1A, L1B, L1C• Issuance rating higher than A-
(govies) AA- (other)
• Larger spectrum of ECB eligible assets
• ECB liquidity classes L1A, L1B, L1C, L1D
• Issuance rating higher than BBB-
Basket 1 – LCHC EURO-GCPLUS LCR EQUIVALENT XS0708254148
Basket 2 – LCHC EURO-GCPLUS ECB RESTRICTED XS0708254817
Eligibility criteria be managed by
Euroclear to ensure liquidity
Concentration limits
for optimumdiversification
LCH.Clearnet RiskManagement usingpurpose-built credit
scoring tools
100 million cash
105 million collateral (5% Haircut)
Initial MarginHC + IM
5,025,662 debit (HC)
4,156,642 debit (Vol.)
ACM + CPC+TRI116,303.88 debit
Total Margin requirement
9,298,609.06 debit
Collateral Taker
MarginingSimulation of margin calculation
100 million cash
105 million collateral (5% Haircut)
Initial Margin: Max (IM – HC,0)
HC: 5,025,662 IM calculation : 4,156,642
ACM + CPC+TRI44,444.44 debit
Total Margin Requirement
44,444.44 debit
Collateral Giver
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Default Management Overview
Minimum Deposit + Defaulter Margin(Total Initial Margin + Triparty Interest Repo Margin +
Concentration Risk Margin +Sovereign Risk Margin + Wrong Way Risk Margin)
Defaulter’s Mutualised Default Fund contribution
Up to 25% of EMIR/EBA minimum LCH.C SA Net Capital Requirement shared across all services
(amount & allocation methodology to be confirmed)
€GC+ Clearing Service
Non-defaulters mutualised €GC+ contribution
Default Fund Replenishment/Assessment of €GC+
Default Fund
Service Continuity Assessment
Loss distribution & close-out€ GC+ services
Defaulter Margin
Funded Capital
LCH. Clearnet SA Capital
Assessment/Service Continuity/Close-out
Other Clearing Services
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Integration within standard Triparty Collateral Management
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• All operations managed by AutoSelect
► Collateral selection► Collateral movements► Margin management► Collateral optimisation
• Optimum liquidity management• Access to all re-use functionalities
Euroclear Bank ESES
Scenario 1
Scenario 3
Scenario 4
Scenario 2
LCH C
LCH C CTCG BdF
CP CT CG
CP
Collateral Management System (CMS)
LCH.Clearnet SA
How to get started?
Membership
CriteriaFixed Income membership criteria for LCH.Clearnet SA
(e.g. Equity capital of €100mn for ICM)
Key Clearing Member requirements (LCH.Clearnet SA)• Contribution to the segregated default fund
(EUR: 2.5mn min., depending on the size of activity)• Extension of existing membership• Triparty agreement with Euroclear and the selection
of a reference CSD
• Collateral management instructions processed under POA granted to LCH.Clearnet SA
• End-to-end scripted testing• Register with one of the electronic trading platforms
(MTS, ICAP, Tullet Prebon)15
Account structur
e
Euroclear AutoSelect Participants account setup
• Taker and Giver accounts in Euroclear Bank or ESES, with pledge facility to BDF (ESES only)
• ‘Cross Taker’ dedicated account for Euroclear Bank participants to allow cross border instructions
LCH.Clearnet SA account setup in Euroclear Bank and in ESES
•Taker, Giver, Cross Taker (EB only) accounts•Margin account in Target2 or a cash clearer•Default accounts and liquidation accounts
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How to get started?
Onboarding
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• Initiate the membership process• Complete Main Application* file• Complete €GCPlus Configuration
form• Submission by Credit Risk
Management Committee (CRMC)• Testing• Approval by Credit Risk Management
Committee (CRMC)• Sign and return all Membership
Agreements and other required documentation
• Go Live
• Initiate the triparty €GCPlus subscription: contact your account manager
• Complete €GCPlus testing forms: triparty testing account, connectivity forms
• Sign the €GCPlus subscription form• Complete the collateral profile form
(annexes) for EB or ESES and interoperability
• Complete Italian tax certification documentation
• Testing• Go Live
LCH.Clearnet SA process Euroclear process
* Main Application file is not applicable for existing clearing members
Why trading €GCPlus?Key benefits
• Available through leading trading platforms• Robust CCP services and risk management by LCH.Clearnet SA• Fully embedded in Euroclear collateral management system• Full re-use capacity in triparty collateral management,
including refinancing with Banque de France • Fully interoperable model between Euroclear Bank and
Euroclear France giving you access to ALL Euroclear Bank and Euroclear France (ESES) counterparties
• DVP settlement with real transfer of collateral • Optimum liquidity management
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Contacts
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Company Contact details
LCH.Clearnet • Nicolas Vincent, Head of Fixed Income +33 (0) 1 70 37 6709 [email protected]
• Nigel de Jong, Group Head of Fixed Income Client Management, Marketing & Sales
+44 (0) 20 7426 7273 [email protected]
• Philippe Scavizzi, Head of Business Development +33 (0) 1 70 37 6721 [email protected]
Euroclear Bank • Olivier de Schaetzen, Product Sales Specialist +32 2 326 28 84 [email protected]
• Your Relationship Manager, Commercial Division
MTS • Amanda Butavand+44 207 7974 246 [email protected]
• Gabriele Frediani+44 207 7971 170 [email protected]
BrokerTec Europe • Dermot Doherty+44 207 0005 805 [email protected]
Tullet Prebon • Graham Martin+44 207 200 7308 [email protected]
