In an effort to enhance liquidity in the Canadian financial markets, the major Canadian clearinghouses are teaming up with Euroclear to develop a new collateral management service for the domestic market.
The clearinghouses for Canada’s equity and fixed income markets, CDS Clearing and Depository Services Inc. (CDS), and the derivatives market clearinghouse, the Canadian Derivatives Clearing Corp. (CDCC), entered a memorandum of understanding with Euroclear pledging to develop a new automated collateral management service.
“The service will be designed to improve interoperability between existing domestic collateral pools and consequently result in increased liquidity and efficient collateral mobility,” the firms said in a release.
The service would enable market players to mobilize collateral that’s held at CDS across their various accounts, including repo, securities lending and cleared and uncleared margin accounts, the firms noted.
The firms also said that the new service will set the stage for international collateral mobility by aligning the Canadian market with global standards.
“We are excited to be working with Euroclear to deliver a solution aimed at enhancing collateral mobility and liquidity in Canada, placing our post-trade infrastructure on par with the most advanced markets in the world,” said Jay Rajarathinam, president of CDCC and CDS.
Subject to regulatory approval, the service is aiming to launch in the second half of 2022.