Feb 08, 2012
Newedge, LSE launch tri-party repo MTF
Prime broker Newedge and MTS, the European fixed income trading market owned by the London Stock Exchange Group, have jointly launched the agency cash
management (ACM) multilateral trading facility (MTF), an electronic auction
facility for the tri-party repo market.
On the platform,
investors enter into secured money market investments using the tri-party repo
mechanism.
Newedge says it launched
the platform in response to increasing demand from institutions for a solution
to the cash management challenges faced by the buy- and sell-side. The platform
runs on MTS fixed income trading market technology.
ACM allows investors to
select acceptable counterparties, rating of collateral, currencies and trade
duration. Collateral is held in a segregated account in the investor’s name at
an established tri-party agent, typically a highly rated custodian bank, and is
subject to transfer of ownership that can be sold on demand if the counterparty
defaults.
The platform is
available for corporates, asset managers, bank treasurers, sovereign wealth
funds, pension funds, securities lenders, insurance companies, banks and hedge
funds. By bringing a new pool of cash providers to the market, the platform
will also benefit banks facing continued pressure to diversify their sources of
funding in the face of new regulations planned under Basel III, Newedge says.
“The new ACM platform
has opened one of the biggest money market products to a new audience that will
ensure best execution for cash investments via our auction methodology,” Angela
Osborne and Ulf Bacher, co-heads of the ACM business at Newedge, said in a
statement. “Newedge is delighted to be working with MTS on this initiative. Our
partnership brings together market experience and best-in-class technology to
offer the benefits of tri-party repo to the buy-side whilst delivering new
pools of liquidity to the sell-side.”
Oliver Clark, money
market product manager at MTS, adds: “The successful launch of our new agency
cash management platform addresses the demand for an innovative cash management
solution for both banks and buy-side investors. ACM introduces the tri-party
repo mechanism to a new group of participants in the form of corporates, hedge
funds and securities lenders in a competitive, electronic auction platform. The
cash providers benefit from the security of tri-party repo in place of
unsecured money market products and their counterparty banks with an
alternative source of funding.”
In a repo, investors
lend cash for a short period of time to another party. Securities are used as collateral
for the loan, and the seller agrees to buy back the security at a pre-agreed
rate of interest and term.
Reporting by Christopher Gohlke, Global Custodian, an Asset International publication