Clearstream, the custody and settlement division of Deutsche Borse, and CETIP, an operator of marketplace for fixed income securities and over-the-counter derivatives in Brazil, have signed an agreement to jointly develop, promote and distribute triparty collateral management services.

This agreement paves the way for a multi-time-zone collateral management insourcing offering in real-time and is in line with the observed trends towards a global consolidation of collateral management activities.

The new service will provide CETIP’s clients in their time zone with the opportunity to have access to the collateral management pioneering services of Clearstream focusing initially on the collateralisation of OTC derivative exposures managed via CETIP.

In a first phase, the triparty collateral management services will enable Brazilian participants to mobilize assets eligible at CETIP and SELIC, the central depository of securities issued by the National Treasury and the Banco Central do Brasil, and a DVP settlement system for outright and repo transactions with these securities. It is envisaged to eventually target also assets eligible at Clearstream in order to fulfill their collateral obligations out of one virtual collateral pool.

This service will be offered on a fully automated basis incorporating auto-allocation, auto-substitutions and optimization of the underlying collateral. Both parties plan to further extend the service range in the space of collateral management over the coming years.

Luiz Fernando Vendramini Fleury, CEO of CETIP, said: “The triparty collateral management services established with Clearstream is a pioneering and best-practice solution for the Brazilian OTC derivatives market. It will notably enable a streamlined risk mitigation so demanded by the Brazilian capital markets. Moreover, CETIP and Clearstream expect to strengthen this cooperation by developing further projects of mutual interest which may go beyond the area of collateral management.”

Jeffrey Tessler, CEO of Clearstream, said: “This cooperation will allow CETIP’s clients to benefit from the unique service range in Clearstream’s Liquidity Hub. This service will improve efficiency in the area of exposure collateralization and help Brazilian customers to further strengthen their risk profiles across their activities.”