Global post-trade services provider Clearstream will link up with Bloomberg to improve trade processing for tri-party repurchase transactions, as market participants look to the repo market to quench their thirst for collateral.
Bloomberg will provide automated order routing to access tri-party repo agreement transactions, making it easier and faster for market participants to access collateral on Clearstream’s Global Liquidity Hub.
The agreement leverages Bloomberg’s straight-through-processing, under which a trade can be executed on the Bloomberg Professional service before being transmitted to Clearstream via an automated SWIFT message, removing the need for additional connectivity to participate as a cash provider for Clearstream.
Stefan Lepp, head of global securities financing for Clearstream, said cooperation with Bloomberg would strengthen links with electronic trading platforms and make tri-party repo transactions more accessible and more attractive as collateral.
“This serves as an example of how our approach of creating strategic partnerships with top industry providers enhances opportunities for our clients,” Lepp said.
Financial services firm Markit has also linked up with custodian bank BNY Mellon, also a provider tri-party repo services, to launch a data tool that offers market participants greater visibility of the repo market.
BNY Mellon will provide US dollar tri-party repo transaction data and position updates, including two-year history data and information on outstanding positions in excess of US$1 trillion.
Presently, the data is being delivered by Excel to beta participants in a phase one trial, which will garner feedback to finalise the system. A complete web-based front end will be available for the buy-side in the next two to three months, a spokesperson for Markit confirmed.
The aggregate repo data will offer enhanced visibility into key drivers of repo pricing at market, sector and security levels and will offer market participants greater clarity into maturities, haircuts, collateral type and collateral quality.
A growing number of buy- and sell-side firms are expected to use repo transactions for collateral, as fears a collateral shortfall will plague global markets in the wake of regulatory reform. Global changes to the banking sector under Basel III rules means banks will need more collateral, while the mandating of central clearing for OTC derivatives trades in US regulation the Dodd-Frank Act and the European markets infrastructure regulation will force market participants to hold more collateral against their swaps trades.