Tradeweb Offers 'Three-Way Confirms' for US Repos
December 12, 2011
Tradeweb Markets says it has implemented so-called three-way trade confirmation on its institutional client-to-dealer trading platform for U.S. tri-party repurchase agreements.
Cash lenders – fund managers -- now have the ability to execute and send details of their tri-party repo deals immediately through Tradeweb to be matched by either Bank of New York Mellon or J.P. Morgan Chase. If the trade details match, then either of the two clearing banks, as defined by the dealer, can settle the repo trades through the Fedwire system.
Tradeweb says that since its launch in 2005, its U.S. tri-party repo platform has executed more than $150 trillion in repo trades. The firm would not comment on the difference between Tradeweb Markets’ confirmation process and Bloomberg's service. In October, Bloomberg announced that its fixed income trading platform would track and matches repo trades using a voice confirmation system (VCON) and will automatically inform BNY Mellon and JP Morgan through the network operated by the Society for Worldwide Interbank Financial Telecommunications that a trade has occurred between a cash lender and a cash borrower.
The new post-trade communications process is part of an overhaul of the operations of the tri-party repo market advocated by a committee of the Federal Reserve Bank of New York in 2010.
In the U.S triparty repo market fund managers are typically lenders of cash while broker-dealers are borrowers. J.P. Morgan and BNY Mellon act as agent banks for borrowers and lenders of cash. Because these are the only two clearing banks for U.S. tri-party repo deals, the New York Fed is worried about their credit exposure. That exposure could happen if the collateral posted by the broker-dealer isn’t sufficient in the event it has to be liquidated as a result of a dealer’s default. Until now, clearing banks relied primarily on transaction data received from broker-dealers, which could occasionally result in a mismatch between the two counterparties in their understanding of the trade details. Neither JPMorgan nor BNY Mellon has ever disclosed the frequency of the errors or costs involved.
“Tradeweb is ideally suited to provide tri-party repo confirmation services because we are already a central part of the repo market workflow,” says Erica Barrett, director of money markets at Tradeweb. “Matching through Tradeweb improves the quality of information being received by the clearing banks and gives counterparties the ability to monitor their trade information. Clients can quickly catch errors and resolve them earlier in the trading day.”
