OCC Confirms $1 Billion Repo Facility for CalPERS

The Options Clearing Corporation (OCC) and eSecLending have collaborated with CalPERS to develop a full collateralized liquidity facility, confirming the clearing house’s move to extend repos and securities lending to pension funds.

The new facility brings OCC’s overall liquidity resources from $2 billion to $3 billion, giving the organization diversity in its lenders, as previously only banks and broker-dealers were involved.

The announcement comes two months after the OCC said it had established a pre-funded $1 billion repurchase facility with an ‘undisclosed pension fund’.

“CalPERS conducted an extensive due diligence process on the facility and are delighted to have established a solution that achieves incremental risk-adjusted returns for our pensioners,” says Curtis Ishii, head of Global Fixed Income at CalPERS.

In January, Global Custodian reported the OCC won regulatory approval to carry out a program that will enable it to carry out repos and securities lending to non-bank firms such as pension funds and insurance companies.

Under the proposal, as the seller of the master repo, the OCC will transfer eligible U.S. government securities to the buyer in exchange for a payment. The buyer will simultaneously agree to transfer the purchased securities back to the OCC at a specified date or on the OCC’s demand.

“Expanding our liquidity resource pool to draw on non-bank facilities allows OCC to meet payment obligations to clearing members in a timely way, thus promoting the uninterrupted flow of financial markets,” adds Craig Donohue, executive chairman, OCC.

eSecLending is the administrative agent for the facility and will support CalPERS with all aspects of the transaction.