HSBC Introduces OTC Clearing Collateral Service

HSBC has responded to the G20 swap clearing reforms by launching an independent, automated collateral management service.

HSBC Securities Services, part of HSBC’s Global Banking and Markets business, today announced the launch of its Over-the-Counter (OTC) Clearing Collateral Service. The purpose of the new service is to support clients in meeting the requirements of the G20 swap clearing reforms which are now extending into Europe and Asia and place a greater demand on buy-side firms to manage and mobilise their collateral more effectively.

Clients can now keep pace with global regulatory change.

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In Europe, the European Market Infrastructure Regulation imposes new obligations on investment management firms to clear OTC derivatives trades through a central counter-party. These are due to come into effect in December 2016. Similar obligations also apply, or will shortly be implemented by local regulators in Asia.

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Commenting on the new capability, Craig Cowe, Head of Collateral Management Product, Securities Services, HSBC, said: “Incoming regulations to centrally clear OTC derivatives mean that it’s crucial for investment managers to know where their assets are and what they can be used for. We’ve put in place collateral processing hubs in Europe and Asia and have invested significantly in our capability to ensure our clients can keep pace with global regulatory change.”

HSBC’s latest offering has responded to the regulatory changes by providing clients with an independent and highly automated collateral management service. This includes calculation and verification of margins and interest as well as automated margin payments.

Collateral movements are processed on a straight-through basis using market standard SWIFT links with custodians. Reporting is provided online via HSBC’s client portal and includes underlying trade and collateral position information.

John Van Verre, Global Head of Custody and Treasury at HSBC, added: “In the past, collateral management has been viewed by many institutional investors as a back office activity. These new regulatory requirements mean that the process is becoming more firmly integrated with the front office, which requires much more proactive management of positions than historically was the case.”

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