Bloomberg has released the first agency-neutral platform allowing investors to process and confirm tri-party repo trades through either J.P. Morgan or BNY Mellon, the two US tri-party repo clearing banks.
The move is part of the Federal Reserves plan to reform the tri-party repo infrastructure, which notoriously placed a huge financial burden on the two banks tasked with clearing the repos. At the height of the tri-party repo market in 2008, J.P. Morgan and BNY Mellon were responsible for underwriting individual counterparty credit risks of up to $400 billion every day.
The two banks have been working toward implementing the reforms set by the Tri-Party Repo Market Infrastructure Task Force, a committee set up by the Fed. Just this week “>J.P. Morgan completed implementation of one of the reforms: three-way trade matching for tri-party repo.
Bloombergs Fixed Income Trading platform tracks and matches repo trades using a voice confirmation system and automatically informs BNY Mellon and J.P. Morgan that a trade has occurred.
The enhancements to our tri-party repo platform bring greater transparency to the market, says Ben Macdonald, global head of fixed income trading at Bloomberg LP. More than 500 trading firms are affected by the guidelines and can now replace ad-hoc methods of matching trades with an automated system that takes the guess work out of meeting the compliance guidelines.
Bloomberg executes more than 85,000 block repo agreements per month across specials repo, general collateral (GC) delivery vs. payment (DVP) and tri-party classifications. There are already 27 dealers exchanging tri-party trade confirmations over Bloombergs FIT platform.
Market participants using Bloombergs system will benefit from the automation of key aspects of the trading process for tri- party repos, says John Vinci, managing director of BNY Mellon Broker Dealer Services. We are fully supportive of the changes recommended by the task force, which will lead to greater confidence and transparency in the tri-party marketplace.
(CG)