Clearstream TriParty Repo Service Launches

Terry Flanagan

Clearstream and 360 Treasury Systems (360T) have announced the first transaction of a streamlined triparty repo system that combines 360T’s front office facilities and Clearstream’s integrated collateral management platform and securities lending product portfolio, the Global Liquidity Hub.

The transaction, which took place on October 17, involved a triparty trade between easyJet as cash giver and Commerzbank as cash taker, and was conducted on the trading platform of 360 Treasury Systems and settled via Clearstream. This was the first triparty trade on 360T, making easyJet and Commerzbank the first counterparties to benefit from Clearstream’s collateral management services via 360T.

The Clearstream and 360T partnership enables corporations, hedge funds and asset managers to benefit from Clearstream’s collateral management services as part of the Global Liquidity Hub offering.

“Over the past months, together with partners like Commerzbank and 360T, we have built a unique value proposition for corporate clients, a customer group which is increasingly looking for safe and efficient alternatives in the money market,” said Stefan Lepp, head of global securities financing. “We are delighted that we could attract a renowned institution like easyJet through this cooperation.”

The triparty repo service is being offered by 360T to “matching” trading partners from the platform’s client database. The counterparties become customers of Clearstream, which facilitates the entire triparty repo administration by using general collateral (GC) baskets of eligible collateral.

Tri-party repo transactions are a type of repurchase agreement involving a third party, the–tri-party agent—which facilitates settlement between dealers (cash borrowers) and investors (cash lenders).

The tri-party agent maintains custody of the collateral securities, processes payment and delivery between the dealer and the investor and provides other services, including settlement of cash and securities, valuation of collateral, and optimization tools to allocate collateral.

According to the Financial Stability Oversight Council’s 2012 Annual Report the current value of the tri-party repo market is $1.8 trillion.

The use of a tri-party agent enables the market to operate more efficiently by reducing settlement risk and related costs, allowing for collateral recall, providing independent collateral verification and monitoring and standardizing transaction agreements.

“We took the decision to begin utilizing triparty repo due to the liquidity of the repo market and the fact that collateralized deposits are more secure,” said Philip Stewart, assistant treasurer at easyJet. “The Clearstream Repurchase Conditions offering and recent tie in with 360T were key differentiators.”

The partnership between Clearstream and 360T is part of a series of recent developments designed to facilitate easy and streamlined access to triparty repo. Earlier this year, Clearstream developed a new legal master agreement for triparty repo transactions (Clearstream Repurchase Conditions, CRC in short) to enable market participants to sign just one contract for multiple counterparties and speed up counterparty “marriage broking”.

The CRC is proving to be of particular interest to new players in the repo market such as corporates who are currently deterred by the existing lengthy contract negotiation process. The CRC is expected to appeal to corporates entering into reverse repos to secure their financing and then, optionally, re-use the collateral they receive to cover OTC derivative margin requirements with clearing members or central counterparties (CCPs).

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