LCH launches new buy-side repo clearing model
14 September 2017 London
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Global clearinghouse LCH has introduced a new model of its RepoClear service for buy-side clients.
Insight Investment, acting on behalf of a UK pension fund, was the first asset manager to clear a trade through the new model.
The trade was executed on Tradeweb Markets.
According to LCH, “buy-side firms such as pension funds are now able to access the service via a sponsorship model, whereby an agent bank provides support to the sponsored member.”
This includes facilitating margin payments and providing default fund contributions for transactions made by the sponsored member.
Mark Stancombe, head of corporate and product strategy at Insight Investment, added: “Insight is always looking for ways to drive innovation on behalf of our clients, particularly where these benefit the efficient implementation of their investment strategies.”
“This initiative with LCH is ground-breaking for the asset management community. It deepens and diversifies repo liquidity and will benefit our pension fund clients by providing efficiencies for them in comparison to non-cleared repo.”
Bruce Kellaway, global head of RepoClear, EquityClear and collateral for LCH, said: “The introduction of this sponsored clearing service is an exciting step for the fixed income market.”
“RepoClear already has a comprehensive offering for our clearing members, and we are delighted to extend the benefits of clearing to the buy side, enabling firms to reduce their risk and maximise balance sheet efficiencies.”
The new repo model launch follows the introduction of a new type of client account within its SwapClear service that allows buy-side clients to deliver collateral directly and retain beneficial title.
The client account, known as CustodialSeg, promises to increase operational efficiency and eliminate the transit risk arising where a client delivers collateral to the clearinghouse via its clearing member.
LCH noted that segregation at an international central securities depository (ICSD) ensures that such securities collateral remains client specific.
J.P. Morgan is the first clearing member, while Aviva Investors is the first buy-side client, to use this new account type.
BNP Paribas and HSBC have also confirmed their readiness to support the new account structure.
Insight Investment, acting on behalf of a UK pension fund, was the first asset manager to clear a trade through the new model.
The trade was executed on Tradeweb Markets.
According to LCH, “buy-side firms such as pension funds are now able to access the service via a sponsorship model, whereby an agent bank provides support to the sponsored member.”
This includes facilitating margin payments and providing default fund contributions for transactions made by the sponsored member.
Mark Stancombe, head of corporate and product strategy at Insight Investment, added: “Insight is always looking for ways to drive innovation on behalf of our clients, particularly where these benefit the efficient implementation of their investment strategies.”
“This initiative with LCH is ground-breaking for the asset management community. It deepens and diversifies repo liquidity and will benefit our pension fund clients by providing efficiencies for them in comparison to non-cleared repo.”
Bruce Kellaway, global head of RepoClear, EquityClear and collateral for LCH, said: “The introduction of this sponsored clearing service is an exciting step for the fixed income market.”
“RepoClear already has a comprehensive offering for our clearing members, and we are delighted to extend the benefits of clearing to the buy side, enabling firms to reduce their risk and maximise balance sheet efficiencies.”
The new repo model launch follows the introduction of a new type of client account within its SwapClear service that allows buy-side clients to deliver collateral directly and retain beneficial title.
The client account, known as CustodialSeg, promises to increase operational efficiency and eliminate the transit risk arising where a client delivers collateral to the clearinghouse via its clearing member.
LCH noted that segregation at an international central securities depository (ICSD) ensures that such securities collateral remains client specific.
J.P. Morgan is the first clearing member, while Aviva Investors is the first buy-side client, to use this new account type.
BNP Paribas and HSBC have also confirmed their readiness to support the new account structure.
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