Markit rolls out triparty repo data
19 March 2013 London
Image: Shutterstock
Markit Securities Finance is seeking to capitalise on the $10 trillion repo market, with the expansion of its content and analytical services to include US dollar triparty repo transactions.
The firm will use triparty US dollar repo data and position updates from BNY Mellon, which has approximately 80 percent of the US triparty market. Adding to this data with original analytics, Markit hopes to aid transparency and price discovery for clients including banks, insurance companies, fund managers and corporations.
The data will include a two-year history and represents outstanding positions in excess of $1 trillion, marking a significant increase in the firm’s original stock loan data set.
The aggregated repo data provides enhanced visibility into the key drivers of repo pricing at market, sector and security levels. It aims to provide repo market participants with greater clarity into transaction maturities, haircuts, collateral type and collateral quality.
“The data we are receiving is at security level, but we can then aggregate that by collateral class level as well,” said David Carruthers, managing director at Markit Securities Finance.
“We could indicate the typical trade rate for corporate bonds, or typical type of haircut for government bonds—you can filter the data by any of these factors. It even includes equities, and is a rich data set that tells you how much money you could make if you were willing to accept a certain type of collateral, and how much you would have to pay if you were pledging that type of collateral and borrowing cash by transaction term.”
As for the reasoning behind the new venture, Carruthers indicated that the US Federal Reserve’s infrastructure reform, the Dodd-Frank Act’s collateral requirements for the central clearing of OTC derivatives and the LIBOR scandal all played their component parts in deciding the launch.
“The Federal Reserve wanted to look at a range of things. After the collapse of Lehman Brothers, they would like repo market participants to embrace longer-term trades, to diversify the range of collateral they accept and counterparties they deal with.”
“In addition, the Dodd-Frank rules and other regulations across the globe will require OTC derivatives to be cleared through central counterparties. As a result, they now have to post initial margin, which they didn’t have to post before. The direct consequence of that is the collateral shortage, and we expect a lot of people will want our information to enhance their collateral optimisation process and for benchmarking collateral swaps.”
The firm is rolling out beta trials to major clients for the next month, after which the data will be available through a web browser with enhanced analytics. Carruthers added that after the trial, this data will be made available to the broader market including corporate treasurers, collateral managers, money market managers, risk managers and commercial banks.
Pierre Khemdoudi, previously of BNP Paribas, and Steve Baker of Calypso Technology have been recruited to Markit as product managers for this and other planned launches.
The firm will use triparty US dollar repo data and position updates from BNY Mellon, which has approximately 80 percent of the US triparty market. Adding to this data with original analytics, Markit hopes to aid transparency and price discovery for clients including banks, insurance companies, fund managers and corporations.
The data will include a two-year history and represents outstanding positions in excess of $1 trillion, marking a significant increase in the firm’s original stock loan data set.
The aggregated repo data provides enhanced visibility into the key drivers of repo pricing at market, sector and security levels. It aims to provide repo market participants with greater clarity into transaction maturities, haircuts, collateral type and collateral quality.
“The data we are receiving is at security level, but we can then aggregate that by collateral class level as well,” said David Carruthers, managing director at Markit Securities Finance.
“We could indicate the typical trade rate for corporate bonds, or typical type of haircut for government bonds—you can filter the data by any of these factors. It even includes equities, and is a rich data set that tells you how much money you could make if you were willing to accept a certain type of collateral, and how much you would have to pay if you were pledging that type of collateral and borrowing cash by transaction term.”
As for the reasoning behind the new venture, Carruthers indicated that the US Federal Reserve’s infrastructure reform, the Dodd-Frank Act’s collateral requirements for the central clearing of OTC derivatives and the LIBOR scandal all played their component parts in deciding the launch.
“The Federal Reserve wanted to look at a range of things. After the collapse of Lehman Brothers, they would like repo market participants to embrace longer-term trades, to diversify the range of collateral they accept and counterparties they deal with.”
“In addition, the Dodd-Frank rules and other regulations across the globe will require OTC derivatives to be cleared through central counterparties. As a result, they now have to post initial margin, which they didn’t have to post before. The direct consequence of that is the collateral shortage, and we expect a lot of people will want our information to enhance their collateral optimisation process and for benchmarking collateral swaps.”
The firm is rolling out beta trials to major clients for the next month, after which the data will be available through a web browser with enhanced analytics. Carruthers added that after the trial, this data will be made available to the broader market including corporate treasurers, collateral managers, money market managers, risk managers and commercial banks.
Pierre Khemdoudi, previously of BNP Paribas, and Steve Baker of Calypso Technology have been recruited to Markit as product managers for this and other planned launches.
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