Newedge UK Financial Limited (‘Newedge’) and EuroMTS Ltd (‘MTS’) have signed a Memorandum of Understanding with Euroclear to promote its global Collateral Highway to manage collateral for triparty repo transactions conducted on the Newedge/MTS Agency Cash Management (ACM) platform in Europe.
ACM is a market-led, FSA-regulated platform that was launched by Newedge and MTS in February 2012. It is the only auction-driven platform for triparty repo transactions between cash and collateral providers geared towards the institutional repo market. Cash providers are generally hedge funds, pension funds, corporates, central banks, family offices, investment managers and bank treasurers, while collateral providers are usually investment banks, commercial banks and asset managers.
Nicolas Breteau, CEO, Newedge, said: “The new regulatory framework brings significant changes to the way institutional investors manage cash and collateral. Linking the ACM platform with Euroclear’s Collateral Highway creates a unique solution that helps participants to maximise the efficiency and transparency of their repo transactions and to meet all pre- and post-trade, operational and inventory management obligations.”
Tim Howell, CEO, Euroclear, adds: “The agreement with Newedge and MTS will go far in ensuring best execution of Agency Cash Management triparty repo deals on a straight-through basis. Given the caution with which market participants are managing risk in the current environment, the Collateral Highway helps cash givers and receivers mitigate counterparty risk by easily collateralising credit exposures with diversified pools of securities on a segregated basis.
"We're delighted to work closely with Newedge and MTS as a post-trade provider for the Agency Cash Management market. We are well equipped to work with even more counterparties, including non-bank institutions, to bring additional and welcome liquidity to the European repo markets.”
Jack Jeffery, CEO, MTS, said: “The ACM platform was launched in response to demand from customers for secured money market investments and the transparency offered by electronic trading. We recognise the sophistication and appeal of Euroclear’s Collateral Highway and the advantages it will bring to our present and future participants. The Agency Cash Management market will significantly benefit from this initiative.”
The Memorandum of Understanding also covers an agreement to jointly market the service and educate existing and potential non-bank clients on the ease and safety with which they can engage in triparty repo transactions.
• Agency Cash Management (ACM) promotes liquidity, transparency, best execution and efficiency to a new pool of cash providers to the repo market for banks facing funding challenges. An alternative to the traditional suite of unsecured money market products, the ACM platform offers access to low-risk cash management investment opportunities for buy-side institutions.
• Euroclear is the world’s largest provider of domestic and cross-border settlement and related services for bond, equity, derivatives and fund transactions. The Euroclear group includes Euroclear Bank, based in Brussels, as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & Ireland.
• The launch in July 2012 of Euroclear’s global ‘Collateral Highway’ introduces a new collateral management and securities financing infrastructure to source and mobilise collateral across borders. By year-end 2012, the Collateral Highway mobilised EUR 700 billion of securities as collateral each day to a wide range of collateral takers. The Collateral Highway links commercial and investment banks, supernationals, central banks, central counterparties and other capital market infrastructure providers across time zones and markets.
• In 2012, the Euroclear group settled the equivalent of EUR 542 trillion in securities transactions, representing 159 million domestic and cross-border transactions, and held more than EUR 23 trillion in assets for clients.
• Euroclear Bank is rated AA+ by Fitch Ratings and AA by Standard & Poor’s.