SSE, CSDC issue repo interim measures
27 April 2018 Shanghai
Image: Shutterstock
The Shanghai Stock Exchange (SSE) and China Securities Depository and Clearing Co (CSDC) have issued and implemented what they are calling the ‘Interim Measures of SSE and CSDC for Transactions and Settlement of Bonds in Collateralised Tri-party Repo’.
The implementation is to improve the multi-level repo market system, better serve institutional investors and promote the healthy development of the bond market at the SSE.
It added that the measures are based on learning from experience gained by overseas repo markets and extensively soliciting and absorbing opinions in the market.
The interim measures define the specifications of the tri-party repo business in terms of investor suitability, collateral management, transaction settlement arrangements and continuity management.
The SSE said the tri-party repo business launched by it and CSDC has the following features.
First of all, the tri-party repo business is subject to access registration management. This imposes strict access restrictions on the repo sell-side with a credit whitelisting system set up in a bid to effectively control risk for the participating parties.
Secondly, eight comparatively standardised collateral bond baskets are set for the tri-party repo business based on bond variety, credit rating and other factors. The SSE said this measure will help improve the efficiency of transaction settlement.
Thirdly, third-party agencies will provide centralised management of collateral, with measures including the selection of collateral and implementing marking to market on the collateral bonds in the duration.
Fourthly, a mechanism for handling collaterals for default has been introduced into tri-party repo in a bid to free the counterparty from worries about default.
The SSE said that in the near future it will step up the organisation and promotion of the tri-party repo business through special training sessions, forums for key institutions and other initiatives, so as to speed up the development of the market.
It said it will also continue to make improvements based on the opinions of the market institutions, increase the operating efficiency and convenience of the business, and boost the role of tri-party repo as an important instrument of liquidity management for financial institutions, with a view to further enhancing the development of the multi-tiered repo market system.
The implementation is to improve the multi-level repo market system, better serve institutional investors and promote the healthy development of the bond market at the SSE.
It added that the measures are based on learning from experience gained by overseas repo markets and extensively soliciting and absorbing opinions in the market.
The interim measures define the specifications of the tri-party repo business in terms of investor suitability, collateral management, transaction settlement arrangements and continuity management.
The SSE said the tri-party repo business launched by it and CSDC has the following features.
First of all, the tri-party repo business is subject to access registration management. This imposes strict access restrictions on the repo sell-side with a credit whitelisting system set up in a bid to effectively control risk for the participating parties.
Secondly, eight comparatively standardised collateral bond baskets are set for the tri-party repo business based on bond variety, credit rating and other factors. The SSE said this measure will help improve the efficiency of transaction settlement.
Thirdly, third-party agencies will provide centralised management of collateral, with measures including the selection of collateral and implementing marking to market on the collateral bonds in the duration.
Fourthly, a mechanism for handling collaterals for default has been introduced into tri-party repo in a bid to free the counterparty from worries about default.
The SSE said that in the near future it will step up the organisation and promotion of the tri-party repo business through special training sessions, forums for key institutions and other initiatives, so as to speed up the development of the market.
It said it will also continue to make improvements based on the opinions of the market institutions, increase the operating efficiency and convenience of the business, and boost the role of tri-party repo as an important instrument of liquidity management for financial institutions, with a view to further enhancing the development of the multi-tiered repo market system.
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