An Industrial Revolution in Funding and Financing
Reference
This article was originally published in ISLA Daily by Securities Financing Times.
Banu Apers, Clearstream’s Head of Securities Lending and Borrowing, and James Cherry, Head of Business Development for Collateral, Lending and Liquidity Solutions, underline the centrality of collateral management, lending solutions and liquidity to financial market stability and discuss how a technology revolution is reshaping financial services.
After several years of geopolitical uncertainty, major central bank liquidity interventions and questions about the future direction of monetary policy, one lesson has become clear. Efficient collateral management has become more important than ever in safeguarding the stability of financial markets.
Liquidity and collateral truly sit at the heart of financial markets, says James Cherry. This is integral to the smooth functioning of a financial ecosystem designed to provide a secure and efficient framework through which companies can raise capital, innovate and promote economic growth.
Faced with growing uncertainty, a focus for many financial sector firms has been on business resilience. While continuing to strive for efficiency gains and opportunities to boost revenue and profit margins, firms are fundamentally committed to the need for resilience in volatile and uncertain markets. Efficient management of liquidity and collateral is fundamental to delivering this resilience.
A parallel strand that permeates nearly every business conversation is a focus on technological change. We are in the midst of a new industrial revolution, one that is transforming information management and reshaping how companies produce and deliver goods and services. Financial services firms like Clearstream, part of Deutsche Börse Group, are embracing this change and are at the forefront of harnessing the opportunities that this creates.
By that fact, Deutsche Börse Group positions itself as being the engineers of the capital markets, applying technology, AI, data and market expertise to deliver efficiency, stability and innovation.
Banu Apers explains that, as a leading provider of global financial market infrastructure, Clearstream continues to innovate and drive product enhancements that help clients to negotiate a constantly-evolving regulatory environment, including a smooth transition to T+1 settlement in the EU and UK. It is also helping clients to take advantage of this technology revolution through AI driven and digital solutions.
Projecting these strategic messages to the funding and financing markets, Apers concludes that in the face of heightened volatility and geopolitical uncertainty the securities lending market has demonstrated robust performance, fuelled by stronger loan demand for specific asset classes, particularly ETFs and Asia-Pacific fixed income securities.
The relatively abundant liquidity and fears of potential collateral shortages that prevailed 3-4 years ago – subsequent to central bank liquidity support during the Covid pandemic – have given way to relative collateral abundance and liquidity markets where cash is both fragmented and in limited supply. This shift has prompted cash takers to seek alternative sources of liquidity and to become increasingly creative in how they access their cash requirements.
Expanding the pool of lendable assets
In securities lending markets, pressure on spreads, and pressure on banks to optimise every unit of balance sheet, is pushing lending intermediaries to look for new ways that they can generate value. Clearstream has continued to expand the pool of lendable assets available through its securities lending programme, bringing on board new lender and borrower counterparties, extending coverage across new locations and supporting rising activity from firms already active in the programme with new asset classes.
This has included the extension of exchange-traded fund (ETF) lending across all of its lending solutions and continued outreach to buy-side clients such as collective investment funds, pension funds and insurance firms.
More generally, a convergence of market forces – including margin pressures, shifting interest rate environments, and the move towards accelerated settlement cycles in the EU and UK – is increasing the demand for sophisticated intraday funding and liquidity tools.
Platform solutions across the value chain
Clearstream has expanded buy-side access to funding and secured financing markets through platform solutions. Clients of Clearstream and SimCorp, the investment management platform solutions provider acquired by Deutsche Börse Group in 2023, can now manage their cleared and uncleared repo activity and instruct their triparty repo lifecycle positions via the SimCorp One front end. This integration enables joint clients to execute GC Pooling® transactions on the Eurex F7® platform and to manage the lifecycle within Clearstream’s triparty platform.
The solution delivers automated, fully STP support across the triparty repo transaction lifecycle, offering users a consolidated view of the collateral in one place while removing the need for multiple bilateral legal agreements with each lender or borrower counterparty.
The SimCorp front end is being implemented through a phased approach, starting with cleared and uncleared repo. Clearstream’s strategic lending solution is scheduled to be integrated into the SimCorp environment during 2027.
In Europe, this solution is attracting interest from asset owners and asset managers, including large pension funds. In Canada, Clearstream has partnered with TMX Group to implement a full-service domestic triparty environment for the Canadian market. The Canadian Central Bank is scheduled to join this programme in early 2027 such that all of the central bank’s securities finance, repo and central bank pledge programmes will be managed through this Canadian Collateral Management System (CCMS).
T+1 accelerated settlement cycle
With the EU and UK transition to T+1 settlement scheduled to take place on 11 October 2027, and with market-wide testing due to commence in early 2027, Clearstream has recently published its T+1 implementation guide, offering step-by-step guidance on how to manage the transition and where clients need to give particular attention. As a provider of settlement liquidity through our fails coverage programme across the ICSD and CSDs/T2S, Clearstream plays an important role in mitigating systemic fails risks through timely delivery of securities in demand and management of the trading chain life cycle.
Clearstream already supports T+0 settlement for a major share of interdealer financing activity executed through triparty repo. This may provide an incentive for more firms to migrate financing activity from bilateral relationships to triparty repo as they prepare for T+1 transition.
For cross-border clients, a key challenge in next-day settlement adoption lies in the potential settlement gap between securities settlement (settling T+1) and FX settlement (settling T+2 for many spot FX transactions).
“The industry is managing the transition to T+1 well, but a reliance on processes still designed for T+2 introduces structural friction points,” says Cherry. The impact of misalignment becomes particularly acute during periods of high market volatility. FX spreads tend to widen during stress periods, liquidity becomes less predictable, and execution timing becomes more critical. The underlying issue is not new, but it is accentuated within the tighter time schedule imposed by T+1 settlement.
Consequently, global FX liquidity patterns are evolving in preparation for T+1. FX execution is moving to earlier in the lifecycle and becoming more closely tied to settlement events. There is a drive toward more real-time, automated, and integrated processing. However, the broader ecosystem, including infrastructure and market practices, still operates according to batch-based models.
Toolkit of solutions
To facilitate this transition, Clearstream offers a toolkit of solutions that will add value in a T+1 environment. In March 2026, Clearstream launched an intraday repo product that brings intraday liquidity to the market. For FX, its Automated FX service mitigates the potential FX exposure resulting from this settlement gap. This is complemented by its suite of predictive analytics tools – namely CollateralNext, LiquidityNext, SettlementNext and LendingNext – designed to mitigate risk and to speed up decision making through ex-ante predictive insights.
This integrated package of solutions, dovetailing with user dashboards and reporting tools, enables users to monitor the probability of trade fails and to take pre-emptive action. If it identifies a potential inventory shortfall, for example, a firm may source the required securities via Clearstream’s strategic securities lending desk. If a shortage of securities is identified close to the settlement deadline, it may draw on emergency liquidity on Settlement Day (SD) through the ASL and ASLplus Autoborrow facilities.
“Beyond this, we already provide a wide range of tools that facilitate accelerated settlement, including partial settlement and hold-and-release”, says Apers. For Securities Financing Transactions (SFTs), the market has worked together to develop an SFT gating settlement solution designed to minimise potential loss of netting efficiency in overnight batch settlement where rolling off repo transactions are waiting for the netting benefits of new repo transactions which will only be traded early the following morning.
On balance, Clearstream believes that T+1 settlement in the EU and UK should be seen as a transitional step, not the end state. This illustrates the direction of travel and the complexity of moving fully to real-time settlement.
Inevitably, the EU is not a single jurisdiction – it has multiple infrastructure entities, complex actors, a disparity of practices across settlement platforms. Consequently, there is additional complexity that must be negotiated in delivering accelerated settlement in Europe when compared with the May 2024 transition to T+1 in three North American single markets, namely the US, Canada and Mexico.
Where innovation meets trust
Digital innovations, such as those around crypto-assets, stablecoins, and investment in distributed ledger technology (DLT), are key in shaping the future strategy of the funding and financing division at Clearstream. As central banks continue to remove liquidity from the market, firms will need to review their liquidity management strategies and to be clear about how they source liquidity through traditional finance and digital channels.
Deutsche Börse Group’s digital post-trade platform D7® currently supports close to €80 billion in natively-issued digital securities. Clearstream recently added a solution for tokenised securities (D7 DLT) to this platform, offering choice to the client regarding whether they opt for digital or tokenised issuance.
“A wide range of initiatives are ongoing to incorporate new world assets into traditional ecosystems,” says Cherry. “We do see some interest in cryptoassets, with stablecoins potentially playing a more significant role in collateral markets. Tokenisation is not about replacing things, it’s about improving the way markets function.”
Clients increasingly need infrastructure that can connect conventional and digital markets without disrupting existing operations, while preserving trust, scale and regulatory robustness. Clearstream’s trusted position as a regulated entity with a robust infrastructure provide a unique foundation to drive digital innovation, delivering secure, scalable, and future-ready solutions.
Steps to improve interoperability between DLT networks will be important to this process. However, institutional investors are in many cases agnostic to whether an asset is held on permissioned blockchain, permissionless or in a TradFi network.
Rather, they care first and foremost, for example, about whether the legal agreement is legally enforceable, whether this structure delivers effective asset segregation, whether there is adequate secondary liquidity, and whether they can re-use the asset.
The fundamental principles of secured lending and financing do not change when digitally-issued or tokenised securities are considered for collateralisation. Alongside rigorous checks on the credit quality of the counterparty, these long-standing preconditions will continue to apply in defining what a collateral taker will accept as collateral and on what contractual terms.
Adopting new technology is likely to offer huge opportunities in moving the industry towards real-time settlement, to enhancing operational efficiency and reducing cost, to integrating predictive analytics, and to delivering many other benefits. However, these fundamental questions of safety, legal certainty and resilience remain inviolable.
