Chicago Mercantile Exchange (CME) Clearing Europe has become a member of Euroclear Bank's Collateral Highway, which facilitates processes such as tri-party collateral management through operating agreements.
CME Clearing Europe, a central counterparty (CCP), will use the Collateral Highway to help with its risk management as the role of CCPs in various transactions grows. Euroclear Bank, through the network, will source securities for use as collateral. Recently, the insitution completed the first cross-border renimnbi-denominated tri-party repo with UBS, HSCB and the Hong Kong Monetary Authority.
CCPs sit between two parts of a transaction, guaranteeing either side in the the case of default from one counterparty. Under regulatory reform, they are taking enhanced roles in trading instruments such as over-the-counter derivatives.
"Central counterparty clearing institutions like CME Clearing Europe are playing a vital role in mitigating credit risk, expanding their role further with new regulatory requirements for OTC derivatives transactions. Indeed, we are very committed to these key infrastructure institutions," says Saheed Awan, global head of collateral management services at Euroclear Bank. "We have made our Collateral Highway available to them so that their clearing members, who are also our clients, are able to deliver collateral for CCP margin calls with ease and efficiency through our triparty collateral management service."