State Street to Pilot Margin Settlement Service

GlobalCollateral, a joint venture of Euroclear and The Depository Trust &
Clearing Corporation (DTCC), says that State Street has agreed to participate
in a pilot program to test their Margin Settlement Messaging Service.

The service, powered
by Margin Transit Utility (MTU) technology, has been developed to provide
straight-through-processing for the settlement of margin obligations. By
participating in the pilot program, State Street looks to further streamline its
margin call processes, increase transparency through automated collateral
settlement tracking, enhance client service, and improve custodian
communications. State Street will initially pilot the MTU functionality with
select client portfolios to evaluate how the technology could be leveraged more
broadly, GlobalCollateral says.

As the industry braces
for upcoming global derivatives regulations that are projected to create an
increase in margin calls and operational complexity, the service provider says market
participants are seeking to leverage a utility-based service model in order to
streamline the collateral process and add transparency.

“State Street and
other fund administrators who support the buy-side segment are at the forefront
of transforming the way collateral is processed,” GlobalCollateral says. “Today,
many fund administrators leverage manual processes which create risk in the
margin call process, limit collateral settlement transparency and require
frequent one-on-one communications with their custodian banks. MTU provides
administrators with a new way to better serve their clients globally while
increasing internal operational efficiency, settlement certainty and
transparency as margin call volumes increase.” 

Dick Taggart,
executive vice president and head of State Street’s Investment Manager Services
(IMS) business, says, “Industry collaboration and a community-based model for
margin call management can decrease risk, drive standardisation and increase efficiency
for our clients. As we enhance our collateral management services, we are
focused on streamlining and scaling the margin call process, improving
settlement certainty and increasing transparency.”

Mark Jennis, executive
chairman at GlobalCollateral, adds, “Global derivatives regulation will require
market participants to completely transform their collateral management
processes, if they are to keep pace with the expected increase in collateral

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Colin Lambert

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