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Pascal Morosini in FX-MM

Pascal Morosini in FX-MM



FX-MM catches up with Pascal Morosini, Executive Director, Global Head of Global Securities Financing Sales and Relationship Management at Clearstream, to delve into the reasons behind the dramatic ...

FX-MM catches up with Pascal Morosini, Executive Director, Global Head of Global Securities Financing Sales and Relationship Management at Clearstream, to delve into the reasons behind the dramatic growth in the triparty repo market.



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    Pascal Morosini in FX-MM Pascal Morosini in FX-MM Document Transcript

    • fx-mm.com February 2014 trading | treasury | technology Safety first: Demystifying the world of Triparty Repo FX-MM catches up with Pascal Morosini, Executive Director, Global Head of Global Securities Financing Sales and Relationship Management at Clearstream, to delve into the reasons behind the dramatic growth in the triparty repo market. Pascal Morosini is a man on a mission, and that is to tell the world that triparty repos are really not that complicated. “My main ambition is to demystify the product and to turn around the view that it is complex,” he says. Maybe it is the name that deters some: those who do not share Morosini’s twentyplus years of experience in the world of collateral management perhaps? But as Morosini explains, triparty repo is one of simplest forms of secured investment: “It really is just a bank deposit backed by assets which are independently held and managed.” The message appears to be getting across judging by the stunning growth in participation in the market. More and more corporates are joining the triparty repo market at Clearstream. Combined cash volumes are now above €25 billion and the number of corporate customers has grown every week since the launch of a revolutionary contract which enables faster access to the market. More than 30 corporates are investing their cash regularly with banks Reprinted from: FX-MM · Volume 20 · Issue 1 · February 2014 Subscribe online @ fx-mm.com
    • E D I TO R ’ S INTERVIEW against collateral using Clearstream’s platform. The market has almost airlines and retail. The common theme between the different tripled in terms of counterparties and volumes in the last two years, participants is, that they have a dedicated treasury function and the firm says. specific cash investment guidelines, explains Morosini. Indeed, even In response, Clearstream continues to adapt its products to cope the most sophisticated treasury operation reaps benefits as with the demand, making trading easier and lowering the barriers to Clearstream has made it much more straightforward for corporate entry for corporate customers. customers to join the secured money market ‘club’. But why is interest in the market, which has normally been the reserve of banks, on the rise in the corporate world? The answer lies in the aftermath of the financial crisis, which left cash-rich corporates uncertain about how to invest their money, with unsecured money deposits no longer seeming such a safe option as concern over counterparty risk grew. Security issues With a triparty repo, companies receive collateral in the form of securities in return for their deposits for the duration of the trade. This means that they are not only able to do more business with the banks that they have existing relationships with, this also opens up a whole new range of counterparties. “The advantage of a triparty repo over cash lending is obvious: it is simply more secure,” says Morosini. “That is what corporate treasurers are looking for as either their unsecured limits are full on the various banks they trade with, or they have concentration issues with those banks and need to diversify across a more secure range of products. With triparty repo, they have many more investment options as well as more diversification in terms of counterparties.” Legal burden eased Regulatory advantages First, a company has to become a customer of Clearstream, which Triparty repos also offer another advantage to some of the large includes signing a triparty collateral management service agreement. corporates who will not be exempt from legislation under EMIR and That mandates Clearstream to perform all the necessary back-office Dodd-Frank from posting collateral for over-the-counter (OTC) administration for the corporate including the collection, valuation derivative transactions with central counterparties (CCPs). and management of securities. By investing cash in a triparty repo, those corporates will receive Next, a corporate has to sign a master repurchase agreement with collateral in the form of securities. They will own that collateral, held their trading counterparty, which sets out the rules and duties of the against their cash in Clearstream’s system, for the duration of the trade various parties under a repo transaction. and will be able to post it with a CCP or clearing counterparty for margin coverage. However, as an alternative to signing many bilateral agreements with different counterparties, Clearstream has streamlined this “So not only do you have the collateral in your own name enabling sometimes arduous process by coming up with a new legal master you to sell it straight away if your counterparty defaults, but also during agreement for triparty repo transactions called the Clearstream the life of the repo, you can use this collateral to cover your derivatives Repurchase Conditions (CRC). liabilities with your clearers,” says Morosini. This new agreement allows market participants to sign just one Indeed, as Morosini points out, triparty repos are an alternative to contract for multiple counterparties, encouraging corporates who were money market funds for those corporates looking to invest their cash deterred by the existing, lengthy contract negotiation process to enter in securities. the market. Demand widens gives you access to a wide range of counterparties that have also The rush from corporates to participate in triparty repos initially came signed under the same agreement,” says Morosini. “The specificity of the contract is that you only sign it once and it from the large multinational enterprises, particularly those from the cash-rich chemical, energy and pharmaceutical sectors. This has been followed by major players from industry groups including telecoms, Reprinted from: FX-MM · Volume 20 · Issue 1 · February 2014 “It is standardized. It is less complex, and it is really straight to the point.” The CRC was launched in June and so far 22 counterparties have Subscribe online @ fx-mm.com
    • E D I TO R ’ S I N T E RV I E W signed it. Clearstream expects that figure to rise to more than 60 by the for corporates looking to manage their risk towards banks who at the end of the first quarter of this year. same time are still willing to grow their relationship with them. On the other side, he says, it provides a flexible solution for banks Simplifying collateral management needing to access cash in overnight and term markets in a new, more Clearstream has also simplified the task of a corporate treasurer by highly regulated market under Basel III and EMIR. designing a wide range of standardized collateral baskets that make it easy to get started in triparty repo. “New regulations are forcing banks to enter into longer term financing arrangements. It will never be acceptable anymore for banks Each basket contains a specific set of collateral guidelines to cater to cover the majority of their financing needs in the shorter end of the for the different risk profiles that a repo investor can choose from. market. Our solution caters not only for different investment terms but These include, for example, a high-grade government bond basket, an also the fact that the collateral mitigates your counterparty risk.” investment grade corporate basket and an index equity basket. Of course for corporates, depending on what collateral they are “With our expertise and our user group’s guidance, we have put together a collection of criteria that cater for different needs and we offer this to the market to use at their own discretion,” says Morosini. “This means that if you are a corporate treasurer, and you are not geared up to prepared to receive in exchange for If you want to combine a cash investment – that is potentially lucrative – with the receipt of collateral, and on top, be able to re-use that collateral to cover derivative obligations with no back office burden, then you have it all assess what kind of securities you can or their funds, the rates on offer could also be more attractive than the returns they currently yield on their current deposits or investments. Morosini predicts significant growth over the next six months in the triparty repo market. That is not only because of cannot accept, we can assist you by offering a range of baskets the numerous requests the firm is receiving from corporates all around measured on different levels of risk and return.” the world for its services, but also because of its unique “one stop The end result is that customers can choose to use these to deal shop” offering that allows customers to quickly become active in the with a wide range of banks spread across 110 countries. secured triparty repo market. Straight-through processing lucrative – with the receipt of collateral, and on top, be able to re-use To give corporate clients access to its services, Clearstream has also that collateral to cover derivative obligations with no back office partnered with 360T, a multi-bank, multi-asset platform based in burden, then you have it all,” says Morosini. “If you want to combine a cash investment – that is potentially Germany. The 1,200 corporate and institutional customers on 360T now have the opportunity to trade triparty repos with a range of banks on the platform, with Germany’s Commerzbank and the airline easyjet the first to strike such a trade on the system in October. As Morosini explains, once the trade between the bank and the corporate is agreed on 360T, it is routed automatically to Clearstream’s collateral management engine. “It is straight-through processed into our platform where we then trigger the exchange of cash against securities,” he says. “All the corporate treasurer has to do is to execute the transaction on 360T and wire the funds to us for clearing. It is as simple as that.” Growth is here to stay Morosini believes the firm’s “all-in” straight-through processing approach from trading through to collateral management gives Clearstream the edge as the preferred provider for triparty repos. Add that to the 22 years of experience that Clearstream has built up since it was the first to launch triparty repos in 1992, and the firm’s state of the art collateral management engine, which runs 24 hours a day in real time, and Morosini is even more optimistic for the future of the market. Pascal Morosini is Executive Director, Global Head of GSF & Broker Dealer Sales and Relationship Management, and in charge of selling Global Securities Financing services to all Clearstream’s clients. Global Securities Financing services include, triparty collateral management, triparty Repo, triparty security lending, securities lending and borrowing services. Pascal Morosini joined the Cedel Group in 1994, starting in Operations to deal with collateral valuation. In 1997, he moved to the triparty Repo operations department of Cedelbank. In 1999, Pascal joined Clearstream Banking’s Customer Relations Department as a Global Securities Financing Sales Specialist. In March 2003, Pascal joined the Clearstream Banking’s Origination team in charge of selling all services of the company to Continental European clients. In January 2007, he became Head of GSF Sales and Relationship, and in September 2010 he became Global Head of GSF & Broker Dealer Sales and Relationship management, a section composed of 16 GSF & Broker Dealer sales and relationship experts, spread over Europe and Asia. Pascal holds a Diploma in Banking Management from the “Centre Universitaire de Luxembourg”. He has also participated in the Clearstream Banking Global Markets training programme. Indeed, he believes the trend for increased levels of participation in the triparty repo market is here to stay. After all, Morosini points out, on one side, it is the perfect solution Subscribe online @ fx-mm.com For further information: www.clearsteam.com Reprinted from: FX-MM · Volume 20 · Issue 1 · February 2014
    • Clearstream Global Liquidity Hub We make finance flow Are you looking for safe and efficient alternatives to money markets? Discover our triparty repo service and benefit from collateralised deposits while maximising your cash returns. gsf@clearstream.com