A new legal master agreement for triparty repo transactions has been developed by Clearstream to enable market participants to sign just one contract for multiple counterparties and speed up counterparty “marriage broking”.
Clearstream Repurchase Conditions (CRC), a master agreement governed by Luxembourg law, effectively enables customers to be able to trade with their chosen counterparties within just a few days.
The CRC contains most of the core provisions of current industry standardised repo agreements. It will offer repo participants the possibility of effectively testing their commercial appetite with regard to numbers of trades and volumes with a counterparty before choosing to carry out the extra effort necessary to enter into other bilateral repurchase agreements.
Already, the CRC is proving to be of particular interest to new players in the repo market who are currently deterred by the existing lengthy contract negotiation process. The CRC is available to customers on both the buy and sell-sides and is expected to appeal to corporates entering into reverse repos to secure their financing and then re-use the collateral they receive to cover OTC derivative margin requirements with clearing members or CCPs.
Stefan Lepp (pictured), head of global securities financing at Clearstream, says: “We have seen clients give up on entering the repo market because they were waiting too long to negotiate bilateral agreements with each of their potential counterparties. So we developed the CRC to deliver a pioneering, refined and simplified contract that offers a workable framework to satisfy the growing marked demand that goes hand-in-hand with new market segments entering the repo space.”
This initiative by Clearstream is the latest in a series of developments designed to facilitate easy and streamlined access to triparty repo. Earlier this year, Clearstream formed partnerships with the electronic trading platform 360T, serving a wide – mainly corporate – customer base, and with Bloomberg, automating the affirmation and processing of triparty repo transactions via Bloomberg terminals.
Triparty repo’s high level of security and efficiency make it a popular money market tool for many financial and non-financial institutions. Repo counterparties agree their transaction terms and can then use a repo triparty agent, such as Clearstream, which can carry out all the margin call arrangements such as automated allocation, substitution and optimisation.
Clearstream’s Global Liquidity Hub encompasses a suite of collateral management and securities lending products for both financial and non-financial institutions worldwide. The Global Liquidity Hub was launched in 2009 and employs an open architecture enabling customers to gain maximised opportunities.
Clearstream customers have the benefit of automated collateral movements with central counterparties, such as Eurex Clearing, LCH.Clearnet Ltd and Oslo Clearing and can pledge collateral to selected central banks – the Bundesbank, Federal Reserve Bank of New York and the Banque centrale du Luxembourg.