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HSBC launches OTC collateral clearing

HSBC towerHSBC Securities Services, one of Europe’s largest custody banks, is looking to build its fund management client base with a collateral clearing product designed to help funds deal with incoming requirements for central clearing.

G20 swap clearing reforms now extending into Europe and Asia place greater demand on buy-side firms to better manage and mobilise their collateral, the firm says.

In Europe, the European Market Infrastructure Regulation, or Emir, places new obligations to clear over-the-counter (OTC) derivatives trades through a central counterparty and these obligations are due to come into effect for most investment management firms in December 2016.

HSBC’s automated collateral management service includes calculation and verification of margins and interest as well as automated margin payments.

Craig Cowe, head of collateral management product, at HSBC Securities Services, 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.”

HSBC said many institutional investors have viewed collateral management as a back-office activity, but that the requirements mean the process is becoming more firmly integrated with the front office.

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