Newedge, a global leader in multi-asset brokerage and clearing, has launched its Agency Cash Management (ACM) platform, a new electronic auction facility for the tri-party repo market. The platform, which has already registered its first trades, has been launched in association with MTS, Europe’s premier facilitator for the European fixed income trading market.
The ACM platform enables investors to enter into secured money market investments using the tri-party repo mechanism. It has been launched in response to increasing demand from institutions for an innovative solution to the cash management challenges currently being faced by both the buy- and sell-side. The platform uses the same technology that facilitates the MTS fixed income trading market, combining secure investment opportunities with the high levels of transparency offered by electronic trading.
Under a repurchase agreement, also known as a repo or sale and repurchase agreement, investors lend cash for a short period of time to another party. Financial securities are used as collateral for the loan, together with an agreement for the seller to buy back the security at a pre-agreed rate of interest and an agreed term.
The ACM platform creates an alternative to the traditional suite of unsecured money market products, and offers access to low-risk secured investment opportunities for buy-side institutions such as, corporates, asset managers, bank treasurers, sovereign wealth funds, pension funds, securities lenders, insurance companies, banks and hedge funds.
By bringing a new pool of cash providers to the market, the platform will also benefit banks facing continued pressure to diversify their sources of funding in the face of new regulations planned under Basel III.
The ACM platform allows investors to select acceptable counterparties, rating of collateral, currencies and trade duration. Collateral is held in a segregated account in the investor’s name at an established tri-party agent, typically a highly-rated custodian bank, and is subject to transfer of ownership that can be sold on demand if the counterparty defaults.
Oliver Clark, Money Market Product Manager at MTS, said: “The successful launch of our new agency cash management platform addresses the demand for an innovative cash management solution for both banks and buy-side investors. ACM introduces the tri-party repo mechanism to a new group of participants in the form of corporates, hedge funds and securities lenders in a competitive, electronic auction platform. The cash providers benefit from the security of tri-party repo in place of unsecured money market products and their counterparty banks with an alternative source of funding.”
Angela Osborne and Ulf Bacher, Co-Heads of the Agency Cash Management business at Newedge, added, “The new ACM platform has opened one of the biggest money market products to a new audience that will ensure best execution for cash investments via our auction methodology.
“Newedge is delighted to be working with MTS on this initiative. Our partnership brings together market experience and best-in-class technology to offer the benefits of tri-party repo to the buy-side whilst delivering new pools of liquidity to the sell-side.”
The ACM operates as Multilateral Trading Facility (as defined under MiFID regulation and FSA supervision) by EuroMTS Limited.
Newedge, a 50/50 joint venture between Société Générale and Crédit Agricole CIB, is a major force in global multi-asset brokerage business, with a world-leading position in the execution and clearing of listed derivative products. With a presence more than 20 locations in 17 countries, Newedge offers a full range of clearing and execution services covering options and futures contracts for financial products and commodities, as well as for money market instruments, bonds, FX, equities, and commodities on OTC markets. Newedge provides a range of value added services, including prime brokerage, asset financing, an electronic platform for trading and order routing, cross margining, and the centralized reporting of client portfolios. Newedge, which primarily serves institutional clients, provides access to more than 85 exchanges. Newedge’s 3,000+ employees form a close-knit, multinational team that can innovatively respond to its clients’ needs in fast-moving markets. For more information, visit www.newedge.com.
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