State Street Corporation has agreed to participate in a pilot programme to test DTCC-Euroclear GlobalCollateral’s Margin Settlement Messaging Service.
Powered by Margin Transit Utility (MTU) technology, GlobalCollateral’s Margin Settlement Messaging Service has been developed to provide straight-through-processing for the settlement of margin obligations.
By participating in the pilot programme, State Street aims to further streamline its margin call processes, increase transparency through automated collateral settlement tracking, enhance client service, and improve custodian communications. State Street will initially pilot the MTU functionality with select client portfolios to evaluate how the technology could be leveraged more broadly.
As the industry braces for upcoming global derivatives regulations that are projected to create an increase in margin calls and operational complexity, market participants are seeking to leverage a utility-based service model in order to streamline the collateral process and add transparency.
State Street and other fund administrators who support the buy-side segment are at the forefront of transforming the way collateral is processed. Many fund administrators leverage manual processes which create risk in the margin call process, limit collateral settlement transparency and require frequent one-on-one communications with their custodian banks. MTU provides administrators with a new way to better serve their clients globally while increasing internal operational efficiency, settlement certainty and transparency as margin call volumes increase.
“We look forward to participating in this programme,” says Dick Taggart (pictured), executive vice president and head of State Street's Investment Manager Services (IMS) business. “Industry collaboration and a community-based model for margin call management can decrease risk, drive standardisation and increase efficiency for our clients. As we enhance our collateral management services, we are focused on streamlining and scaling the margin call process, improving settlement certainty and increasing transparency.”
“Global derivatives regulation will require market participants to completely transform their collateral management processes, if they are to keep pace with the expected increase in collateral calls,” says Mark Jennis, executive chairman at GlobalCollateral Limited. “It is great to see State Street and many of their peers acknowledging the benefits of an automated margin call process, in support of their own operational and risk management goals as well as to increase client and counterparty satisfaction.”
As of 31 March, 2016, GlobalCollateral Limited received authorisation from the Financial Conduct Authority (FCA) to operate its MTU. With this milestone met, the MTU service is now client ready and available.
