New reform prompts market practice update for tri-party reverse repurchase agreement settlement and confirmation
ISITC (International Securities Association for Institutional Trade Communication), the industry trade group focused on standards in transaction processing and related communications, today released an updated Market Practice for tri-party reverse repurchase agreement settlement and confirmation. In partnership with the Asset Managers Forum (AMF), the ISITC Settlements Group updated the ‘tri-party repo’ guidelines in response to new reforms released by the Federal Reserve Bank of New York (FRBNY).
Last updated in August 2010, the ISITC Tri-Party Repo Market Practice has been newly refreshed to reflect recent guidelines issued by the FRBNY due to be implemented by August 2011. These reforms introduce and strongly recommend the netting of tri-party reverse repo trades to reduce the number of intraday cash wires. After reviewing the FRBNY recommendations, ISITC and the AMF developed a series of solutions to help automate the netting process. The Market Practice addresses the various netting scenarios presented by these guidelines, including single deal netting scenarios, multiple deal single broker netting scenarios, and multiple deal multiple broker netting scenarios.
The scope of the Market Practice document defines tri-party reverse repos and the business practices between the investment manager, custodian bank, and/or accounting agent. ISITC is also currently developing best practices for matching which will provide further direction for tri-party repo matching.
“Part of our mission at ISITC is to respond to industry regulation and develop best practices for all market constituents,” comments Erica Choinski, executive sponsor of the ISITC Settlements Working Group. “When we first learned of the FRBNY guidelines, we teamed up with the AMF to really understand how we could comply with the new reforms and bring a greater degree of automation to the netting process. ISITC encourages all US tri-party repo market participants to utilize this Market Practice and we welcome continued feedback from the industry.”
To download the Tri-Party Repo Market Practice, visit: www.isitc.org/market_practice
