Quad-party Repo is an extension of the widely-used and highly acclaimed Tripartite Repo Service of Clearstream. The fourth party involved - the local agent bank appointed by the cash taker to hold their domestic assets - becomes an extension of the triparty set up. Instead of forcing the cash taker to move the assets from their domestic agent bank into the international market for financing, quad-party enables the triparty repo to be extended into domestic markets, thereby respecting the cash takers choice of where they want to hold their assets.
Citigroup, the pre-eminent global financial services company, and Clearstream, the leading international central securities depository have jointly developed the service, and Barclays Capital, a key user of collateralised financing services at Clearstream, executed the first trade last week.
The service involves Global Transaction Services acting as Clearstream’s collateral sub-custodian, and vice versa on a non-exclusive basis. This allows clients to mobilise assets held internationally and domestically in order to maximise collateral usage under existing tri-party financing facilities.
The new service gives clients the following benefits:
- Improved depository management (externally financed assets stay with their local settlement agent)
- Lower (book-entry) transaction and back-office costs related to collateral management
- Flexibility in terms of collateral allocation including same-day substitutions
- Use of auto-allocation facilities
- Simple, quick implementation with minimal additional documentation
- Respect for clients’ existing relationships with service providers and cash lenders
Volker Potthoff, Managing Director of Clearstream International stated "This innovation enables clients like Barclays to derive direct benefits through the mobilisation of both internationally and domestically held assets which maximises the usage of collateral. It is also another good example of Clearstream’s partnership approach in developing services that directly meet the needs of our clients.”
Gian Paolo Potsios, Managing Director, European Financial Infrastructures Head, Global Transaction Services says, “This initiative demonstrates Citigroup ’s commitment to provide its customers with the greatest degree of liquidity and convenience within the traditional market structures for global liquidity and collateral management services.”
Mark Dearlove, Managing Director, Global Head of Liquidity Management at Barclays Capital added, ”This is a key milestone for this area as we are pioneering a new type of trade which overcomes some significant issues and enables us to utilise our collateral in a way never done before. We expect these types of quad-party trades to be commonplace in the future.”
