The Margin Transit Utility provides straight-through-processing and centralised communications and settlement instructions for collateral transfer.
DTCC-Euroclear GlobalCollateral Ltd – a joint venture between DTCC (the Depository Trust & Clearing Corporation) and Euroclear – has announced that six new dealers have adopted its MTU (Margin Transit Utility) collateral settlement infrastructure, as the firm moves beyond its pilot production phase.
GlobalCollateral was established to help firms address an array of collateral- and liquidity-related needs that have become more acute in recent years as regulatory mandates have extended their reach. Specifically, margin call activity has increased as a result of mandatory clearing of standardised derivatives and new margin requirements for non-centrally-cleared derivatives.
This has put pressure on traditional manual processes and creating the need to simplify collateral settlement processing, optimise the use of collateral, and further enable the mobility of collateral, including across borders, to match global demand for high-quality liquid assets.
The MTU service was designed to offer improved efficiency for the transfer of collateral among market participants by providing straight-through-processing and centralising communications and settlement instructions within the MTU.
According to a statement, Goldman Sachs, JP Morgan, Morgan Stanley, Societe Generale, UBS and Wells Fargo are among the latest to adopt the MTU, driven by their clients’ needs to reduce risks related to operational, liquidity and counterparty risks.
In adopting the MTU, they join over 30 investment management, administrator and custodian firms – which include Fidelity, Franklin Templeton, Vanguard and Brown Brothers Harriman. Nine global custodians are also in various stages of testing with the MTU, and GlobalCollateral is in the process of engaging with around 40 other regional custodians.
The MTU service includes connectivity from AcadiaSoft’s MarginSphere and ALERT for enriched SSIs (standing settlement instructions), connectivity to custodians and triparty providers, confirmation of settlement, and standardised reporting.
“Calculating margin calls, generating and affirming calls and determining eligible collateral, and then instructing our custodian with real-time settlement updates and end-of-day position reporting, will significantly reduce operational, counterparty and liquidity risks,” said Vanguard global collateral specialist John Montgomery.
“Manual processes and scalability challenges are prevalent across the industry, and MTU will help to automate triparty and bilateral margin calls for both segregated and non-segregated accounts to better support clients and reduce settlement fails,” said Societe Generale’s New York Head of Collateral, Joseph Spiro.
GlobalCollateral also provides a separate collateral management utility, which automates collateral management tasks, re-positions inventory seamlessly across settlement locations, and makes collateral available where and when it is needed.