BNY Mellon, which has been active in such arrangements since June 2017, is sponsoring a significant amount of both money market and hedge fund repo activity into the clearinghouse.
“Clients have really embraced it,” said James Slater, co-head of BNY Mellon Markets and global head of securities finance, liquidity and collateral segregation. “By taking advantage of our connectedness, we can give clients the benefits of our unique liquidity pool and a range of counterparties they would not otherwise be able to access.”
Since BNY Mellon already custodies many of the assets involved in repo as the world’s largest custodian, triparty agent and sole clearing agent for US government securities, clients may derive other administrative and risk benefits because the securities never have to leave the bank’s ecosystem.
The volume of sponsored repo activity in the clearinghouse was $230 billion as of December 31, according to Fixed Income Clearing Corporation (FICC), which is part of settlement giant Depository Trust & Clearing Corporation. Of that, $137 billion were from money market funds, according to the US Office of Financial Research (OFR), up from nearly $35 billion at the end of 2017.
As of June 1, OFR listed 27 money market funds as participants in the program. Several hedge funds are being sponsored into FICC as well. Last January the DTCC announced that Capula Investment Management LLP was one of them.