The Collateral Highway links commercial and investment banks, supranationals, central banks, central counterparties and other capital market infrastructure providers across time zones and markets.
The firms have been working since last year to develop their triparty collateral management arrangements.
Under the arrangement, securities that are held in local custody with BNP Paribas may be used as collateral in triparty collateral management deals that are managed by Euroclear Bank.
In a statement, Frederic Hannequart, chairman of Euroclear Bank, said: “This partnership is particularly timely and important as demand for collateral continues to increase. By joining forces, we alleviate one of the challenges of collateral fragmentation by making the transfer of collateral to the right place at the right time as seamless and operationally simple as possible. As the first agent bank live on our Collateral Highway, we applaud BNP Paribas’ foresight and drive to offer their clients a flexible and innovative option to ease collateral flows. We are delighted to be partnering with them.”
Alain Pochet, head of clearing, settlement and custody at BNP Paribas Securities Services, added: “This is a major achievement for both parties, and comes at a very appropriate timing for our clients who face significant regulatory changes. From today, they will be able to flawlessly finance their available securities, which will help them address the ever-increasing demand for collateral.”
“The first trade completed through this partnership was executed in the Spanish market. It allowed our mutual client to use available securities held with BNP Paribas Securities Madrid as collateral for the triparty transaction administered by Euroclear Bank. This resulted in increased purchasing power for the client. The transaction was easy and successful, and we are confident that this collaboration will continue to bear fruit in future—in fact, this same service is already available in the Italian market as well.”
BNP Paribas Securities Services and Euroclear Bank are working to extend the scope of their arrangement to the main European and Asian markets.
Euroclear Bank's Collateral Highway had used €700 billion of securities as collateral each day by the year-end of 2012, according to its first recorded results.
Citi and CME Clearing Europe are among the firms to have signed up to the Collateral Highway since its inception in July 2012.