The International Capital Market Association (ICMA) announced yesterday that buy-side firms can now use TRAX2 for repurchase agreements (repo). For the first time, both buy- and sell-side firms can match and report repo trades using the same system (www.TRAX2.org).
This innovative market offering was made possible by ICMA's development, in co-operation with market participants, of a unique fund ID database which allows buy-side firms to identify individual trades for specific funds and so successfully automate the confirmation process integrating TRAX2 with their own systems.
Robert Galione, head of operations, European Credit Management, comments, "TRAX2 fills a major gap for us and completes our electronic confirmation coverage. ECM's policy is to PV forward cash flows making far leg reconciliation essential for the control of our business. TRAX2 will automate this and make our rapidly expanding repo business much more scaleable."
Kevin Milne, managing director, ICMA, notes, "We are pleased to offer repo participants, in both buy- and sell-side firms, increased matching opportunities, and more efficient reporting which will translate to a significant reduction in their operational risk. We are continuing to develop the TRAX2 system to address the evolving needs of the market".
The repo market is the fastest growing sector of the European capital market, now valued at Eur 6.4 trillion (December 13, 2006).
ICMA worked closely with the operations committee of the Association of Foreign Banks (AFB), the European Repo Council (ERC) and ICMA members to design TRAX2 to include the needs of repo market participants.
According to Ian Holden, operations manager, European Credit Management, "By using TRAX2 we will reduce significantly both our costs and operational risk. It will minimise our manual intervention and make our rapidly expanding Repo business much more scaleable."
Repo is still traded in large volumes over-the-counter (OTC) which can lead to increased levels of operational risk through human error causing delayed settlement and verification. TRAX2 allows firms to manage their operational risk effectively by matching trades that have not been transacted on an automated trading system in all asset classes and in real-time with their counterparties, virtually eliminating failed trades at settlement, the ICMA says. An additional benefit of TRAX2 is that users can fulfil their transaction reporting requirements in a range of financial instruments to a number of specified regulatory authorities throughout the EU.