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Open Inventory Sourcing. Fouad Estephan Euroclear Collateral Conference Tuesday, 13 May 2014. CSDs. CCPs. agents. central banks. custodians. banks. Collateral Transformation. Collateral Highway OIS value proposition. Optimise the management of your domestic inventory

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Open Inventory Sourcing


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    1. Open Inventory Sourcing FouadEstephan EuroclearCollateral Conference Tuesday, 13 May 2014

    2. CSDs CCPs agents central banks custodians banks Collateral Transformation Collateral HighwayOIS value proposition • Optimise the management of your domestic inventory • efficiently pool your domestic collateral resources to be used in triparty • maximise financing of domestic assets in triparty without impacting settlement and custody in the domestic markets • reduce operational burden of managing domestic inventory to be used in triparty 2

    3. Active Q4-2014 Q1-2015 2015-16 OIS coverage Current markets and roll-out EuroclearBank Triparty Netherland Belgium Germany UK Italy France Singapore USA Japan Spain Hong Kong Covering Equities and Fixed Income securities 3

    4. Open Inventory Sourcing service Automated inventory management Agent Client ② EB EB ICSD ISO messages & reports ① Client / Giver Taker Open Inventory Sourcing ③ Fully automated and dynamic inventory management service: • Calculate your available positions in each market that you are subscribed for based on reporting received from your agent • generate automatically matching settlement instructions that transfer the securities from your domestic account to your Euroclear Bank account • combine OIS with the powerful optimisation feature in triparty 4

    5. Open Inventory Sourcing service Consolidating fragmented pools for optimisation Open Inventory Sourcing Collateral Management & Optimisation EB ICSD Domestic markets Client@Italy Client@Spain Bank 1 Repo – Set1 Client@EB CCP1 Repo – Set 2 Client@UK Asset Manager Repo – Set 3 Pool of securities collateral Fixed Income & Equities Client@France Central Bank Liquidity – Set 4 Client@Germany Derivatives – Set 5 CCP2 Client@USA Client@Japan Sec. Lending – Set n Lender 5

    6. Main features Granular selection of your domestic securities • Set-up – granular OIS eligibility criteria: • Rating • Indices • Instrument nature (debt, equity) • Instrument category (bond, bill, note,...) • Issuer type (sovereign, supranational, corporate,…) • Issuer country • Securities type (ABS,…) • Options: • Minimum amount to be left on domestic a/c • Maximum amount to be sourced into triparty • Applicable to pool of securities with prioritisation features • OIS can generate FoP or DvPtransactions Available criteria

    7. Automatic processes Main principles in each OIS runPriority to your activity on the domestic market • In each OIS run, securities required for settlement on the domestic market are: • excluded from the pool of available securities, and / or • delivered back from your EB account to your domestic account if already used in triparty • Securities in excess (not needed for domestic settlement or corporate actions) are moved from your domestic account to your EB account within the limits you have defined Integrated systems ensure your domestic needs are always fulfilled

    8. Automatic processes Main principles in each IM runCorporate Actions • For Fixed Income, corporate events can be serviced by EB as currently done • For Equities, corporate events are usually serviced by the agent. Therefore, when a CA is detected, equities are: • excluded from the pool of available securities, and / or • delivered back from your EB account to your domestic account if already used in triparty Integrated systems ensure your domestic needs are always fulfilled

    9. Operational set-upReconciliation • The OIS sends external settlement instructions and matching MT 540/542 messages on your domestic account • OIS settlement instructions are reported in standard settlement reports with specific client references • For reconciliation purposes, you may integrate in your system those OIS specific references • e.g. • IMXI123456713012 Euroclear Bank • e.g. • IMDI123456713012 Agent

    10. Operational dayExample – Spain S S-1 Market cut-off time 16:00 17:00 16:30 10:00 AutoSelect processes 14:25 08:00 15:30 AS AS AS AS AS Inventory Manager runs 16:20 07:50 09:50 15:20 14:15 IM IM IM IM IM 16:10 15:10 Recommended deadline for clients to put settlement instructions on the domestic market Additional IM runs can be set up if needed 10

    11. For internal use