Non-European members of the Liquidity Alliance will be able to benefit from the implementation of Target2-Securities through their members in Germany and Spain.
ASX, operator of the Australian Securities Exchange, central securities depositories Cetlip in Brazil and Strate in South Africa will have access to the T2S pool through Clearstream in Germany and Iberclear in Spain, extending collateral services cross-border and offering mobilisation in real-time.
The settlement will integrate assets, enabling smooth collateral transactions. The member companies will be able to consolidate European and domestic assets in to one pool of liquidity, transferring collateral between the tow relatively easily.
Jesús Benito, CEO of Iberclear, said: “The Liquidity Alliance's initiative of providing worldwide collateral access to T2S is a major milestone in its history. We are proud to be a key part of this new facility, which will allow all members to tap the huge collateral resources T2S will make available."
The alliance had already developed concepts for offshore collateral used to cover domestic exposures, but T2S will allow this collateral to be accessed from EU markets.
Strate CEO Monica Singer said: “While we had already been following the project with interest from a distance, we did not think we could benefit directly. Our Liquidity Alliance membership now opens up a great opportunity to access T2S and we are confident it will greatly streamline the activities of our customers in Europe.”
Clearstream commissioned two studies in to how it could help clients make the most out of T2S. In 2013, PricewaterhouseCoopers identified room for streamlining the custody chain and reducing risks.
In a 2014 report, Oliver Wyman revealed additional benefits of consolidating securities and cash holdings in the T2S markets. By doing this, the report estimated that asset managers and banks could save between €30 million and €70 million each year.
Stefan Lepp, head of global securities financing and member of the executive board at Clearstream, said: “Clearstream has long been at the forefront of uncovering hidden benefits of T2S for the market. We recognised its immense advantages early on and were one of the first infrastructures to join and to develop a clear T2S pricing strategy.”
“It is only natural for us to not just bring the best of T2S to our customers but also to our global partners in the Liquidity Alliance.”
Clearstream will connect to T2S in the third wave on 12 September 2016, and also intends to make euro bonds available through the network. Iberclear will connect in during the fourth wave.
It is hoped that access to T2S from Liquidity Alliance members will add a global dimension to the T2S project, increasing desirability of cross-border settlements and collateral flow in Europe and boosting liquidity both within the EU and beyond.
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