ASX Collateral hit new high in August
17 September 2019 Sydney
Image: Shutterstock
Australia Stock Exchange (ASX) Collateral triparty hit a year-to-date high of 41 percent market share of repo activity from Reserve Bank of Australia’s (RBA) open market operations (OMO) in August.
ASX Collateral is a fixed income, tri party repo, securities lending and over-the-counter collateral management service that holds and mobilises collateral directly within the Austraclear central securities depository. It is also RBA’s only appointed triparty collateral manager.
Recent data shows that increased demand for cash has been associated with an increase in the repo rate at which the RBA transacts through its OMO. The data shows that the RBA repo rate has a strong influence on funding levels in the Australian market.
Sasha Conoplia, sales manager, settlement and collateral at ASX, explained that while AUD spreads have normalised to around 15 basis points (bps) to 25bps over the cash rate, spikes continue to be seen over quarter-ends with June trading up to 45bps over.
With the cash rate falling to 1 percent and potentially lower, the spreads available remain attractive and represent a greater percentage of outperformance in a lower rate environment, Conopila highlighted.
“We continue to see the increased interest and adoption of tri-party in Australia. Volumes have increased from both existing customers settling more trades via tri-party and new customers joining the ASX Collateral platform”, said Conoplia.
Recognising the enhanced funding return opportunities, Conopila noted that the buy-side continues to develop their business strategies to include tri-party reverse repo.
“Customers see the value of participating in the growing Australian repo market and want an efficient platform like ASX Collateral through which to transact,” he said.
“In the current environment of risk mitigation, cost focus and use of technology to replace manual tasks with straight through processes, there is greater recognition of the collateral optimisation and scale benefits that ASX Collateral triparty brings.”
ASX Collateral is a fixed income, tri party repo, securities lending and over-the-counter collateral management service that holds and mobilises collateral directly within the Austraclear central securities depository. It is also RBA’s only appointed triparty collateral manager.
Recent data shows that increased demand for cash has been associated with an increase in the repo rate at which the RBA transacts through its OMO. The data shows that the RBA repo rate has a strong influence on funding levels in the Australian market.
Sasha Conoplia, sales manager, settlement and collateral at ASX, explained that while AUD spreads have normalised to around 15 basis points (bps) to 25bps over the cash rate, spikes continue to be seen over quarter-ends with June trading up to 45bps over.
With the cash rate falling to 1 percent and potentially lower, the spreads available remain attractive and represent a greater percentage of outperformance in a lower rate environment, Conopila highlighted.
“We continue to see the increased interest and adoption of tri-party in Australia. Volumes have increased from both existing customers settling more trades via tri-party and new customers joining the ASX Collateral platform”, said Conoplia.
Recognising the enhanced funding return opportunities, Conopila noted that the buy-side continues to develop their business strategies to include tri-party reverse repo.
“Customers see the value of participating in the growing Australian repo market and want an efficient platform like ASX Collateral through which to transact,” he said.
“In the current environment of risk mitigation, cost focus and use of technology to replace manual tasks with straight through processes, there is greater recognition of the collateral optimisation and scale benefits that ASX Collateral triparty brings.”
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