23 November 2012
Reporter: Jenna Jones
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Euroclear widens Collateral Highway

In a continued effort to create the first fully open global market infrastructure to source and mobilise collateral across geographic borders, Euroclear Bank’s ‘Collateral Highway’ has expanded into South Korea.

Euroclear Bank has signed a Memorandum of Understanding with the Korea Securities Depository (KSD) “to usher in the wider use of Euroclear Bank-eligible securities as collateral by international counterparties when securing collateralised transactions with local Korean investment counterparties,” said a statement from Euroclear.

The Collateral Highway is expected to be useful to South Korea in two specific collateral management domains—secured loans and derivatives contracts—which up until now have been reliant on cash and South Korean securities that are posted as collateral.

“Upon the launch of the service, [South] Korean entities will be able to secure securities lending and derivatives transactions using a possible range of over 600,000 securities eligible at Euroclear Bank—naturally subject to the prearranged eligibility requirements which both trading parties have agreed to,” added Euroclear.

Euroclear Bank expects the Collateral Highway to go live in South Korea no later than June 2013.

Olivier Grimonpont, Euroclear general manager and regional head for Asia Pacific, said: “The agreement with KSD reinforces our commitment to the Asia-Pacific region and builds on many initiatives which we have started. In recent times, we have worked closely with our partners KSD to help them launch an off-shore [South] Korean funds platform using Euroclear Bank’s investment fund processing technology.”

“Beyond [South] Korea we are crystalising our mission of ‘post-trade made easy’ by cooperating with the likes of the Hong Kong Monetary Authority to strengthen cross-border access to liquidity and with Bank Negara Malaysia to extend the attractiveness of Asian bond markets to foreign investors.”

Kyung Dong Kim, chairman and CEO of KSD, said: “As the sole CSD in the nation, my organisation oversees the issuance and circulation of 2,500 trillion worth of [South] Korean won securities.”

“In an ever expanding global market space, it is only normal that our local clients look at bigger and better ways to attract trading counterparties from within the region, Europe and the Americas. This MoU with Euroclear Bank unlocks the door to wider cross-border business flows with their 1400 clients based in over 90 countries.”

Euroclear’s Collateral Highway went live earlier this year, with the Hong Kong Monetary Authority’s Central Money Markets Unit and BNP Paribas Securities Services among the first to sign up.

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