Tri-Party Repo Interoperability Agreed by Clearing Houses

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The project is being backed by the European Central Bank.

Euroclear Bank, Eurex Clearing and Clearstream have agreed an interoperability framework, allowing access to each other's infrastructure in an attempt to ease collateral flow across European borders and increase efficiency in the tri-party repo market.

Euroclear will link its systems with those of Clearstream and Eurex Clearing, both of which are owned by Deutsche Börse. The project has a provisional live goal for the end of 2015. The effort is linked at reducing trade failure through the fragmentation of collateral pools, and for promoting the ability to move collateral quickly between designated points in the Eurozone.

"Today's memorandum of understanding is a big step forward towards building a true single European capital market," says Godried De Vidts, a member of the International Capital Markets Association's European Repo Council, which signed an agreement with the parties to deliver the interoperability measures. "No longer will the fragmentation of location of collateral in Europe harm the transmission of liquidity between market participants. When completed, this development will contribute to a safer settlement environment allowing banks to allocate cash to the real economy where most needed."

Repurchase agreements, known as repo, are the sale of bundled securities from one counterparty to another, on the understanding that the seller will buy them back at a later date. In tri-party repo agreements, a custodian bank or clearing house sits between the parties and acts as an intermediary, performing roles such as collateral allocation and substitution.


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