Euroclear and The Depository Trust & Clearing Corporation (DTCC) have signed a Memorandum of Understanding to create a joint collateral processing service which will significantly increase efficiency, reduce risk and support the growing collateral needs of industry participants. Initially, the joint services will offer automatic transfer and segregation of collateral based on agreed margin calls relating to over-the-counter derivatives and other collateralised contracts.
This will significantly reduce settlement risk, increase transparency around collateral processing on a global basis and will provide maximum asset protection for all participants. DTCC and Euroclear will also establish mutual links, permitting firms to manage collateral held at both firms’ depositories as a single pool.
The joint service will be operated as an industry cooperative and will provide open and non-discriminatory access to all other collateral processing providers, including custodians, CSDs and ICSDs, that wish to link their services to the joint service.