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DTCC and Euroclear create collateral processing joint venture

The Depository Trust & Clearing Corporation (DTCC) and Euroclear have announced the creation of a joint venture that will leverage both companies’ expertise, technology and franchises, focusing on collateral processing. The newly-created company, DTCC-Euroclear Global Collateral Ltd, will be domiciled in the United Kingdom, and its operations are subject to regulatory approvals.

Ownership and governance of the joint venture company will be shared equally between DTCC and Euroclear with its Board and senior executives drawn from the two firms’ management.  

Joint Venture services

The joint venture will bring to market a Margin Transit Utility (MTU) and Collateral Management Utility (CMU).  The MTU will provide straight-through processing of margin obligation settlement, leveraging current DTCC infrastructure, as well as additional infrastructure now in development in coordination with the industry.  Industry testing of the MTU is scheduled to begin in mid-2015. The CMU will address the global challenge of sub-optimal collateral allocation and mobility, through utilizing Euroclear’s market-leading Collateral Highway, and will follow the launch of the MTU.  

The joint venture will operate open architecture services thereby facilitating access to other central securities depositories, custodians and settlement agents.

Senior management comments

Euroclear Chief Executive Officer Tim Howell said: “We are delighted to be partnered with DTCC in this milestone for our industry. The creation of this joint venture company will deliver to our clients increased efficiency and reduced costs within the highly-fragmented and complex collateral management industry.  Firms within the post-trade world span multiple countries, if not continents.  By drawing on the combined resources and expertise of two of the largest post-trade infrastructure providers in the world, this strategic partnership with DTCC will play a leading role in addressing the challenge of efficiently allocating and mobilizing capital across the globe.” 

DTCC President and CEO Michael Bodson added: “This joint venture reflects DTCC’s and Euroclear’s commitment to delivering global solutions that help safeguard the stability of the financial markets. The company will play a critical role in helping the industry address capital and operational challenges resulting from the vastly increased volume and velocity of margin movements worldwide that are anticipated under regulations promulgated by financial reform legislation such as Dodd-Frank and EMIR. We are pleased to be partnering with Euroclear in the development of an open-architecture venture that will be accessible to market participants from across the globe.”

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