82,889
edits
Triparty agent: Difference between revisions
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| (8 intermediate revisions by the same user not shown) | |||
| Line 1: | Line 1: | ||
[[File:Triparty Diagram.png| | {{a|g| | ||
[[File:Triparty Diagram.png|center|450px|thumb|A triparty agent structure yesterday]] | |||
}}“Tri-party.” It sounds such ''fun'', doesn’t it? | |||
One who manages a [[tri-party collateral arrangement]]. A useful fellow if you want to grant [[Security interest|security]] over a revolving pool of collateral securities and retain a right of substitution. Some useful discussion there at [[Financial Collateral Regulations]]. | |||
Often [[triparty agent]]s are behemoth banks like JPMorgan, Bank of New York Mellon, or clearing systems like Euroclear. | |||
{{ | Negotiating in a triparty arrangement can be quite the three-legged race. It can be like dealing with an architect and a builder who blame each other every time the ceiling collapses. | ||
===How it works=== | |||
See handy diagram over yonder ==>. | |||
The triparty agent acts as a [[custodian]]. It opens separate accounts in the name of a {{gmslaprov|borrower}} (usually a [[broker]] looking to “upgrade” securities in its equities and [[prime brokerage]] businesses, optimising its funding position for [[margin loan]]s it has made) and {{gmslaprov|lender}} — typically a large wealth manager whose clients have lots of government bonds and other high-quality securities they want to earn some extra yield), and transfers {{tag|collateral}} between them at their joint instruction, in satisfaction of [[margin]] obligations under the stock loan between the lender and borrower, which will be documented under a separate [[master agreement]]. A {{gmsla}} or something similar. So very popular with [[agent lender]]s and [[agent lending]] participants as a handy way of managing collateral received from [[broker]]s who are borrowing their securities to of their [[prime brokerage]] desk, as this handy diagram purports to illustrate. | |||
The [[triparty agent]] acts as {{tag|custodian}} and has legal title to securities which it holds as trustee for the [[broker]], so at first [[broker]] is the beneficial owner. When the securities are transferred to a lender as collateral, the triparty custodian effects this in its own books and records by debiting [[broker]]’s account – whereupon [[broker]] ceases to have any legal or [[beneficial interest]] in the securities – and credits them to the {{gmslaprov|Lender}}, whereupon the {{gmslaprov|Lender}} holds the beneficial interest. | |||
At all times while the securities are in the triparty system, the [[triparty custodian]] owns legal title. It moves securities by book entry in its own records – there is no physical movement of actual securities once they’re in the triparty system. The [[broker]] can credit and debit securities from its long box account more or less at will (as long as it keeps a sufficient collateral balance in there) in order to meet its own requirements for hedging (and its PB clients’ interests in rehypothecated custody assets) | |||
===[[Pledge GMSLA]]=== | |||
Note - after the [[Basel III]] reforms, it has become expensive for [[broker]]s to post (haircutted) {{tag|collateral}} by [[title transfer]] because they pick up [[LRD]] exposure to the Lender for the return of excess {{tag|collateral}} - becuase they are an unsecured creditor, see? Many are moving to a [[pledge GMSLA]] for agent lending arrangements (ithe pledge GMSLA only makes commercial sense for a {{gmslaprov|Lender}} (like an [[agent lender]] who has no need to [[reuse]] the collateral) | |||
{{sa}} | |||
*[[Account control agreement]] | |||
*[[Agent lending]] | |||
*[[Pledge GMSLA]] | *[[Pledge GMSLA]] | ||
*[[Financial Collateral Regulations]] | *[[Financial Collateral Regulations]] | ||