A money market fund managed by asset manager Insight Investment has completed its first repo trade cleared via a central counterparty, providing investors in the fund with access to a fresh pool of liquidity and marking a further milestone in the structural development of the liquidity market.
Back in 2017, Insight, on behalf of its clients, became the first asset manager to clear on LCH’s RepoClear service, acting on behalf of a UK pension fund client.
This latest trade, placed by the GBP£24 billion Insight GBP Liquidity Fund, was cleared by the RepoClear ‘Sponsored Clearing’ service operated by global clearing house LCH. The service provides buy-side market participants with access to central clearing, a facility which until recent years has been largely restricted to the banking community. Central clearing can offer capital and operational efficiencies, enabling firms to reduce their risk, while increasing capacity in the market. It provides an alternative source of liquidity to the more common route of one-to-one, or ‘bilateral’, counterparty trading relationships.
Chris Brown, Head of Money Markets at Insight Investment and portfolio manager of the fund, says: “This development is significant for money market funds, which use repo as an asset class and can now access a wider pool of liquidity. The ability of the buy side to clear with a central clearing counterparty deepens and diversifies the available sources of repo liquidity.”
Bruce Kellaway, Head of Rates, Securities and Collateral at LCH, says: “We are delighted that Insight’s money market fund has cleared its first repo trade as a sponsored member of RepoClear. Sponsored Clearing enables buy-side firms to reduce their risk and access the additional repo capacity unlocked through balance sheet netting. This demonstrates how clearing benefits both the buy- and sell-side and supports increased market liquidity for all.”
