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Deutsche Boerse Group
South Africa’s financial institutions come together to meet global
regulations through collateral optimisation
* Some of South Africa’s largest financial institutions, including banks,
fund managers and the Johannesburg Stock Exchange (JSE), explore collateral
optimisation services to efficiently manage collateral within the South
* The service is offered by Strate, South Africa’s Central Securities
Depository (CSD), in partnership with Clearstream, the International CSD
(ICSD) and national CSD group; and
* The service looks to optimise the use of collateral to meet growing local
and international regulatory requirements, such as Basel III, Solvency II
and Regulation 28 of the Pension Funds Act.
JOINT PRESS RELEASE OF STRATE (SOUTH AFRICA) AND CLEARSTREAM
Strate, Africa’s leading Central Securities Depository (CSD), and
the International CSD (ICSD) and national CSD that is part of Deutsche
Group, today announced the launch of a centralised collateral management
service for the South African financial market. Some of South Africa’s
financial institutions*, including banks, a number of fund managers and the
Johannesburg Stock Exchange (JSE), have committed to exploring the use of
services to more efficiently manage collateral and to mitigate operational
credit risk within the South African market.
The introduction of new international regulations, such as Basel III and
Solvency II, which aim to protect the financial markets from systemic risk,
will place pressure on the availability and funding costs associated with
holding high-quality liquid assets (HQLA). In addition, the G-20 Finance
Ministers have also recommended that all standardised
derivatives should be cleared with central counterparties (CCPs). This move
will require initial margin – which has traditionally been in the form of
but may be expanded to include HQLA - to be placed with the CCPs.
OTC derivatives will also have to be collateralised.
Such regulations are set to affect the South African market as financial
institutions will need to hold greater regulatory and solvency capital with
increased requirements for unencumbered HQLA. The cumulative effect of each
these changes, the need for greater transparency as well as the specific
African regulatory and legislative obligations stated in the Financial
Act and Regulation 28 of the Pension Funds Act, point to a re-think of
collateralisation in the industry.
As a result, South Africa’s financial institutions, together with Strate,
formed a Collateral Management Industry Forum with a view to explore the
optimisation of collateral in the local market via Strate’s Collateral
Management Service. The service was initially developed by Clearstream who
offered this collateral management service on an outsourced basis to market
infrastructures, like CSDs, outside Europe's borders since 2011. Along with
South Africa, Brazil and Australia have been other non-European
Despite cash being a common form of collateral, many financial institutions
South Africa are investigating the use of securities (equities, bonds and
market instruments) in order to meet their regulatory obligations. The use
securities as collateral does, however, introduce certain complexities and
market is looking at Strate’s service to more efficiently and automatically
manage their collateral.
Strate’s Strategic Projects Director, Anthony van Eden, explains that there
been an overwhelming interest from the local market for the use of the
“We are also in discussion with a number of other financial institutions,
addition to the ones named above, who are seeing the benefit of this
industry-wide initiative and exploring the use of the service.”
Market-wide collateral optimisation is, to a large degree, a panacea for
collateral fragmentation, scarcity and shortages, which the service looks
Stefan Lepp, Head of Global Securities Financing and Member of the
Board of Clearstream, says, “We are delighted that we have partnered with
Strate in South Africa to assist financial institutions in managing their
domestic collateral more efficiently.” Lepp explains that it is a strategic
priority of Deutsche Börse Group to make global markets more robust through
risk and liquidity management solutions such as Clearstream’s collateral
management outsourcing service. “Collateral has become a very scarce
and sourcing good quality collateral is increasingly expensive. The service
looks to manage collateral holdings and exposures much more efficiently to
provide markets with access to much needed liquidity.”
As part of its risk and liquidity management offering, Clearstream has
developed a collateral management outsourcing solution allowing its market
infrastructure partners like Strate to manage the collateral of their
underlying client base. The assets never leave the domestic environment and
remain under local jurisdiction; hence contractual agreements between the
partner (Strate) and its domestic client base remain unchanged. The
has gained momentum, as upcoming regulatory changes require financial and
non-financial institutions to improve their capital management.
Clearstream is the only collateral management services provider with a
ability to manage collateral across time zones without transferring assets
of the respective domestic environment. The collateral management
service went live with Brazilian CSD Cetip in July 2011, with the ASX
Australia, in August 2013, with Spanish CSD Iberclear and Strate in October
2013. SGX, Singapore, has signed a Letter of Intent with Clearstream and
Clearstream and Canadian CDS have announced that they are working together
towards a collateral management solution for the Canadian market.
Strate is licensed as South Africa's Central Securities Depository (CSD)
providing post-trade products and services to the financial markets. As the
trusted independent provider of innovative post-trade products and services
Africa, Strate offers state-of-the-art technology, international expertise
global best practice to the financial markets.
Strate provides electronic settlement for securities - including equity,
and derivative products, such as warrants, Exchange Traded Funds (ETFs),
notes and tracker funds for Africa’s largest stock exchange, the
Stock Exchange (JSE), as well as the settlement of money market securities
the South African market and equities for the Namibian Stock Exchange. It
recently added Collateral Management Services and new Asset Servicing
to its portfolio. Strate provides services to issuers for their investors
terms of the Companies Act (2008) and Financial Markets Act (FMA) (2012).
For more information, please visit www.strate.co.za
Clearstream is the leading global provider in liquidity and collateral
management services with more than 20 years of experience in this field.
As an international central securities depository (ICSD) headquartered in
Luxembourg, Clearstream provides the post-trade infrastructure for the
market and services for securities from 53 domestic markets worldwide.
Clearstream’s customers comprise approximately 2,500 financial institutions
more than 110 countries. Its services include the issuance, settlement and
custody of securities, as well as investment fund services and global
securities financing. With around EUR 11.7 trillion in assets under
Clearstream is one of the world’s largest settlement and custody firms for
domestic and international securities.
As a central securities depository (CSD) based in Frankfurt, Clearstream
provides the post-trade infrastructure for the German securities industry,
offering access to a wide number of markets in Europe.
For more information, please visit www.clearstream.com
Media contact Clearstream:
Media contacts Strate:
+27 (0)11 759 5317
Nicole De Matos
+27 (0)11 759 5405
Further information from Deutsche Boerse Group
is available under http://deutsche-boerse.com/press
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