BNY Mellon is the first tri-party agent to provide collateral services for securities settled through the Stock Connect, making it easier to use China A-shares as collateral.
With BNY Mellon as a tri-party agent, it expands the range of eligible collateral available to investors trading through the programme and supports cross-border volumes into and out of China.
“BNY Mellon Markets is always looking for ways to increase liquidity for our clients. Our Stock Connect solution does just that, by unlocking the ability to utilise these assets as collateral, bank and broker dealer clients now have an additional avenue to finance inventory and reduce funding costs via tri-party collateral management,” said Natalie Wallder, head of collateral management, Asia-Pacific, BNY Mellon.
Tri-party collateral services previously did not exist for China A-shares, largely because collateralising shares on the Shenzhen and Shanghai Stock Exchanges required considerable adjustments to collateral models in order to integrate with local legal and market infrastructures.
The launch of the service follows the go-live of China A-Shares on the MSCI Emerging Markets Index for the first time.
MSCI predicts the inclusion of China A-shares will drive an initial flow of around $20 billion to shift and track the China A-shares market.
BNY Mellon’s tri-party offering brings together various parts of its markets, asset servicing and Pershing businesses.