For financial and capital markets, financial services provide a means of making financial transactions more secure.
Developing our financial services is one of the main strategic priorities when it comes to implementing the specifications suggested by the Ministry of Finance for the Casablanca Stock Exchange’s development. In fact, enhancing the security of financial services is crucial in bringing about any of the envisaged reforms such as new market compartments, the clearing system or opening up the stock exchange platform to international companies, particularly African.
The AMMC will of course play a significant role here but the stock market compartments will be the primary beneficiaries at the expense of unstructured markets such as government or corporate bonds.
As far as corporate bonds are concerned, Treasury securities brokers (IVTs), as the major players, are meant to ensure that regulations are complied with. On the secondary market, Treasury bonds are not only traded but are increasingly regarded as the only instruments to be used as collateral in repo transactions and other securities lending and borrowing transactions.
As a debt security guaranteed by the State, they are replacing corporate bonds, which do not offer warranties or have only just started to do so with the recent Addoha issue and the upcoming Alliances one.
To make it easier for institutional investors to access short- and medium-term refinancing on capital markets and extend competition to corporate bonds, warranties must be developed and become part of the mainstream.
Banks, fund managers, insurers and pension funds are turning more and more to this type of refinancing which currently remains limited to government bonds. However, whether in the case of a repo or ‘repurchase agreement’, which is a very popular type of short-term financing instrument, especially for the banks, or medium-term securities lending and borrowing, financial institutions sell assets (e.g. government or corporate bonds) to others who undertake to repurchase them an agreed date and at a pre-determined price. If the latter do not have the funds to repurchase the securities, the creditor remains the owner of the securities and can resell them.
Consequently, warranties are absolutely vital for the circulation of securities and ensure that the market’s refinancing mechanism functions properly. For all these reasons, we need to be open-minded and attentive to what is happening overseas!
It just so happens that, in Paris, Euroclear, a specialist in delivery and settlement and repo transactions, has created, with the launch of its Elixium electronic trading platform, a collateral exchange which is to be an integral part of the Paris financial market. This new exchange aims to improve market liquidity by converging all collateral requirements towards a single trading platform.
Banks, asset managers and other institutional investors will carry out their transactions on this platform, which is currently being developed by Euroclear, on which all repo and secured debt transactions will be traded. This has become all the more important now that the collateral on government bonds used as a warranty is becoming increasingly rare because of increased demand for these securities, as a result of both banking regulations which require this type of warranty and the high volume of government bonds being purchased by the European Central Bank.
With the new Euroclear platform, investors will be able to connect directly with their counterparties, which could be banks or other investors. They will have access to all sources of collateral, with the added advantage of greater transparency in terms of price and size.
In fact, the main goal of this new market is to increase liquidity on the collateral market and reduce trading costs. Euroclear’s collateral exchange is scheduled to become operational in September…
Afifa Dassouli
Original article : https://lnt.ma/services-financiers-bourse-collateral-innovation-a-suivre/
Pour aller plus loin
