UK clearinghouse LCH has extended its sponsored clearing model for repo trading to more buy-side firms with early supporter Insight Investments already live with additional funds.
Regulated investment funds including authorised designated investment companies, unit trusts, and common contractual funds are now eligible for sponsored clearing at RepoClear.
LCH confirmed that Insight Investment has gone live with additional funds for sponsored clearing at RepoClear. The firm was the first to clear a repo trade in 2017 with LCH through the sponsored model, acting on behalf of a pension fund it manages with NatWest Markets supporting the trade as the agent member.
“Insight was the first investment manager to transact cleared repo on behalf of a UK defined benefit pension and our team has been working closely with LCH to expand this access,” said Jos Vermeulen, head of solution design at Insight Investment. “We are very pleased that investors in our QIAIF range can now take advantage of the same broad market access and liquidity via RepoClear.”
Sponsored or direct clearing has increased among the buy-side in recent years as a means of easing pressure on bank balance sheets and delivering operational efficiencies to fund managers.
The model provides the buy-side with direct relationships with clearinghouses and support from agent member banks as counterparties for cleared transactions. The buy-side traditionally has indirect connections to clearinghouses, using clearing brokers as intermediaries.
“This expansion of RepoClear’s sponsored clearing model is a significant development for the UK fixed income market,” said Bruce Kellaway, global head of securities and collateral at LCH. “We are delighted to further extend the benefits of clearing to a greater portion of the buy side, enabling market participants to access repo capacity, maximise pricing and balance sheet efficiencies and ultimately optimise their risk management.”