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Tri-party repo: Difference between revisions
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Tri-party {{tag|Repo}} is a transaction for which post-trade processing --- collateral selection, payment and settlement, custody and management during the life of the transaction --- is outsourced by the parties to a third-party agent. Tri-party agents are custodian banks. In Europe, the principal tri-party agents are Clearstream Luxembourg, Euroclear, Bank of New York Mellon, JP Morgan and SIS. In the US, there are only two: Bank of New York Mellon and JP Morgan. | Tri-party {{tag|Repo}} is a transaction for which post-trade processing --- collateral selection, payment and settlement, custody and management during the life of the transaction --- is outsourced by the parties to a third-party agent. Tri-party agents are custodian banks. In Europe, the principal tri-party agents are Clearstream Luxembourg, Euroclear, Bank of New York Mellon, JP Morgan and SIS. In the US, there are only two: Bank of New York Mellon and JP Morgan. | ||
===Relationship between the parties | ===Relationship between the parties unchanged=== | ||
Because a tri-party agent is just an agent, use of a tri-party service does not change the relationship between the parties, as the agent does not participate in the risk of transactions. If one of the parties defaults, the impact still falls entirely on the other party. This means that parties to tri-party repo need to continue to sign bilateral written legal agreements such as the GMRA. | Because a tri-party agent is just an agent, use of a tri-party service does not change the relationship between the parties, as the agent does not participate in the risk of transactions. If one of the parties defaults, the impact still falls entirely on the other party. This means that parties to tri-party repo need to continue to sign bilateral written legal agreements such as the GMRA. | ||
===Not a trading venue per se=== | ===Not a trading venue per se=== | ||