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SGX, Clearstream developing collateral facility for institutional investors

Singapore Exchange (SGX) and settlements firm Clearstream are jointly developing a facility that will make it easier for Singapore institutional investors to use their stocks and bonds as collateral for their trades, reducing the need for cash outlays.

SINGAPORE: Singapore Exchange (SGX) and settlements firm Clearstream are jointly developing a facility that will make it easier for Singapore institutional investors to use their stocks and bonds as collateral for their trades, reducing the need for cash outlays.

SGX said the new facility -- when ready in about 12-18 months -- will boost liquidity in financial markets and reduce risk.

"The system really looks at the mobilisation of assets that are currently underutilised or not utilised at all in the Singapore market," Nico Torchetti, senior vice president and head of post-trade services at SGX, said at a media briefing.

These assets will be used to cover exposures that institutions might have, thereby reducing the dependency on using cash as collateral, he added.

SGX and Clearstream signed a Letter of Intent in September 2013 to explore the launch of a collateral management service that will enable customers to more easily and efficiently use assets held at SGX's CDP securities depository for their collateral needs.

Clearstream, a wholly owned subsidiary of Deutsche Börse, ensures that cash and securities are promptly and effectively delivered between trading parties. 

It also manages, safekeeps and administers the securities that it holds on behalf of its customers.

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