Triparty collateral management reaches cruising speed


With the last phase of EMIR's implementation in September 2022, collateral management by triparty agents for triparty schemes has really reached cruising speed.

Highly-anticipated regulatory clarification 

The recent clarification provided by the European Commission in a Q&A published last July on custodians’ obligations with respect to reconciliation puts an end to the debate over the ambiguity of the initial text and opens the door for wider dissemination of the model. After nearly two years of exchanges, to which Societe Generale Securities Services (SGSS) contributed significantly within the France Post Marché association (formerly AFTI), the regulatory authorities confirmed that the daily integration of positions complies with regulations.

When a regulatory obligation becomes a commercial advantage

Triparty collateral – which is applicable to transactions involving OTC derivatives, securities lending/borrowing and repos, and is a regulatory obligation above certain thresholds – considerably facilitates the task of monitoring counterparty risk for asset managers. The implementation of these schemes could become a tangible commercial argument for developing business activities.

It is worth noting that one regulatory obligation is successful on two fronts, reducing risks and improving operational efficiency:

Schematically, the asset owners and their counterparties define the collateral eligibility criteria and trigger thresholds together, and delegate the operational management of securities transfers to a triparty agent that is independent from their own custodian in order to cover the changes in value of their transactions.

The flexibility of the algorithms developed by the triparty agents offers precise management of coverage requirements, as the types of securities, currencies and frequency of transfers can all be configured.

SGSS is aware of its clients’ needs and has developed an offering granting them access to triparty collateral services, whether the service provider is a CSD or a commercial bank. SGSS provides its clients with privileged access to CSDs, as needed, and has deployed the communication protocols required. The solution applies equally to funds and asset owners, be they French or Luxembourgish.

SGSS understands the relative complexity of the system. That's why after defining the operating model corresponding to its clients' needs, SGSS offers them A-to-Z support for the system's operational implementation. This includes reviewing legal documentation, opening accounts, defining settlement/delivery circuits, setting up collateral matrices, drafting or sending follow-up reports and reconciling positions.

Discover our Derivatives and Collateral Management Services solutions.

Mélanie d’Estaintot,
Product Engineer, Societe Generale Securities Services