Multi-asset brokerage and clearing firm Newedge has launched its Agency Cash Management (ACM) platform, an electronic auction facility for the tri-party repo market.
The platform, which has registered its first trades, was launched together with MTS Group, a facilitator for the European fixed-income trading market.
The ACM platform allows investors to enter into secured money market investments using the tri-party repo mechanism. It was launched to respond to the higher demand from institutions for an innovative solution to the cash management challenges now experienced by both the buy- and sell-side.
The platform utilizes the same technology that facilitates the MTS fixed-income trading market, which offers secure investment opportunities and transparency offered by electronic trading.
Under a repurchase agreement or a repo or a sale and repurchase agreement, buyers would lend cash for a short period of time to another party. Financial securities are utilized as collateral for the loan along 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 offers an alternative to the traditional suite of unsecured money market products, and gives 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, the platform will also benefit banks feelingthe pressure to diversify funding sources given the 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 separate account in the investor’s name at an established tri-party agent, which is usually a highly-rated custodian bank. It is also subject to transfer of ownership that can be sold on demand if the counterparty defaults.
“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," said Oliver Clark, money market product manager at MTS. "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.”
“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," added Angela Osborne and Ulf Bacher, co-heads of the agency cash management business at Newedge. “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.”