Creating flexibility and efficiency in Self Collateralising Repo (SCR)

Greater automation of the SCR process for efficient liquidity management

Euroclear UK & International Limited and CREST

Euroclear UK & International Limited, the trusted Central Securities Depository (CSD) of the UK, operates the CREST system, which is the primary platform for settling transactions in and holding UK securities. The CREST system is used to settle transactions for UK securities, including equities, gilts and money market instruments on a Delivery Versus Payment (DVP) basis . Euroclear UK & International Limited has embarked on a multi-year transformation programme for the CREST system with the vision for the transformed CREST system becoming the benchmark of stability for the UK financial markets as well as to drive ecosystem efficiency with value-added services to our diverse customer base. We are proud to announce the next step in the transformation journey.

Automated return of SCR collateral

The Bank of England (BoE) supports settlement in Central Bank Money (CeBM) in the CREST system by providing intraday Sterling (GBP) liquidity to the CREST settlement banks through SCR and a process known as auto-collateralisation. The open positions that are created are then closed out by the end of each working day, traditionally at the end of the day through an automatic reimbursement process.

Euroclear has optimised the SCR process to allow the automated return of assets at the BoE if sufficient liquidity is available throughout the day. CREST settlement banks will no longer have to wait for the end of day ‘150 – GBP Payments Deadline’ diary event and the full unwind of assets held, to see excess liquidity returned to the BoE.

The new facility provides the following benefits:

Operational efficiency: the ability for CREST settlement banks to manage liquidity more efficiently intraday.

Reduces costs: more efficient liquidity management reduces market friction and costs.

Systematic risk reduction: this change will reduce systemic risk in the UK market by reducing the concentration on an end-of-day process and the trade volumes outstanding intraday.