FX-MM catches up with Pascal Morosini, Executive Director, Global Head of Global Securities Financing Sales and Relationship Management at Clearstream, to delve into the reasons behind the dramatic growth in the triparty repo market.

1. fx-mm.com
February 2014
trading | treasury | technology
Safety first:
Demystifying
the world of
Triparty Repo
FX-MM catches up with Pascal Morosini, Executive
Director, Global Head of Global Securities
Financing Sales and Relationship Management at
Clearstream, to delve into the reasons behind the
dramatic growth in the triparty repo market.
Pascal Morosini is a man on a mission, and that is to tell the world that
triparty repos are really not that complicated.
“My main ambition is to demystify the product and to turn around the
view that it is complex,” he says.
Maybe it is the name that deters some: those who do not share
Morosini’s twentyplus years of experience in the world of collateral
management perhaps? But as Morosini explains, triparty repo is one of
simplest forms of secured investment: “It really is just a bank deposit
backed by assets which are independently held and managed.”
The message appears to be getting across judging by the stunning
growth in participation in the market.
More and more corporates are joining the triparty repo market at
Clearstream. Combined cash volumes are now above €25 billion and the
number of corporate customers has grown every week since the launch of
a revolutionary contract which enables faster access to the market.
More than 30 corporates are investing their cash regularly with banks
Reprinted from: FX-MM · Volume 20 · Issue 1 · February 2014
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2. E D I TO R ’ S
INTERVIEW
against collateral using Clearstream’s platform. The market has almost
airlines and retail. The common theme between the different
tripled in terms of counterparties and volumes in the last two years,
participants is, that they have a dedicated treasury function and
the firm says.
specific cash investment guidelines, explains Morosini. Indeed, even
In response, Clearstream continues to adapt its products to cope
the most sophisticated treasury operation reaps benefits as
with the demand, making trading easier and lowering the barriers to
Clearstream has made it much more straightforward for corporate
entry for corporate customers.
customers to join the secured money market ‘club’.
But why is interest in the market, which has normally been the
reserve of banks, on the rise in the corporate world?
The answer lies in the aftermath of the financial crisis, which left
cash-rich corporates uncertain about how to invest their money, with
unsecured money deposits no longer seeming such a safe option as
concern over counterparty risk grew.
Security issues
With a triparty repo, companies receive collateral in the form of
securities in return for their deposits for the duration of the trade. This
means that they are not only able to do more business with the banks
that they have existing relationships with, this also opens up a whole
new range of counterparties.
“The advantage of a triparty repo over cash lending is obvious: it is
simply more secure,” says Morosini.
“That is what corporate treasurers are looking for as either their
unsecured limits are full on the various banks they trade with, or they
have concentration issues with those banks and need to diversify
across a more secure range of products. With triparty repo, they have
many more investment options as well as more diversification in terms
of counterparties.”
Legal burden eased
Regulatory advantages
First, a company has to become a customer of Clearstream, which
Triparty repos also offer another advantage to some of the large
includes signing a triparty collateral management service agreement.
corporates who will not be exempt from legislation under EMIR and
That mandates Clearstream to perform all the necessary back-office
Dodd-Frank from posting collateral for over-the-counter (OTC)
administration for the corporate including the collection, valuation
derivative transactions with central counterparties (CCPs).
and management of securities.
By investing cash in a triparty repo, those corporates will receive
Next, a corporate has to sign a master repurchase agreement with
collateral in the form of securities. They will own that collateral, held
their trading counterparty, which sets out the rules and duties of the
against their cash in Clearstream’s system, for the duration of the trade
various parties under a repo transaction.
and will be able to post it with a CCP or clearing counterparty for
margin coverage.
However, as an alternative to signing many bilateral agreements
with different counterparties, Clearstream has streamlined this
“So not only do you have the collateral in your own name enabling
sometimes arduous process by coming up with a new legal master
you to sell it straight away if your counterparty defaults, but also during
agreement for triparty repo transactions called the Clearstream
the life of the repo, you can use this collateral to cover your derivatives
Repurchase Conditions (CRC).
liabilities with your clearers,” says Morosini.
This new agreement allows market participants to sign just one
Indeed, as Morosini points out, triparty repos are an alternative to
contract for multiple counterparties, encouraging corporates who were
money market funds for those corporates looking to invest their cash
deterred by the existing, lengthy contract negotiation process to enter
in securities.
the market.
Demand widens
gives you access to a wide range of counterparties that have also
The rush from corporates to participate in triparty repos initially came
signed under the same agreement,” says Morosini.
“The specificity of the contract is that you only sign it once and it
from the large multinational enterprises, particularly those from the
cash-rich chemical, energy and pharmaceutical sectors. This has been
followed by major players from industry groups including telecoms,
Reprinted from: FX-MM · Volume 20 · Issue 1 · February 2014
“It is standardized. It is less complex, and it is really straight
to the point.”
The CRC was launched in June and so far 22 counterparties have
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3. E D I TO R ’ S
I N T E RV I E W
signed it. Clearstream expects that figure to rise to more than 60 by the
for corporates looking to manage their risk towards banks who at the
end of the first quarter of this year.
same time are still willing to grow their relationship with them.
On the other side, he says, it provides a flexible solution for banks
Simplifying collateral management
needing to access cash in overnight and term markets in a new, more
Clearstream has also simplified the task of a corporate treasurer by
highly regulated market under Basel III and EMIR.
designing a wide range of standardized collateral baskets that make it
easy to get started in triparty repo.
“New regulations are forcing banks to enter into longer term
financing arrangements. It will never be acceptable anymore for banks
Each basket contains a specific set of collateral guidelines to cater
to cover the majority of their financing needs in the shorter end of the
for the different risk profiles that a repo investor can choose from.
market. Our solution caters not only for different investment terms but
These include, for example, a high-grade government bond basket, an
also the fact that the collateral mitigates your counterparty risk.”
investment grade corporate basket and an index equity basket.
Of course for corporates, depending on what collateral they are
“With our expertise and our user
group’s guidance, we have put together a
collection of criteria that cater for different
needs and we offer this to the market to use
at their own discretion,” says Morosini.
“This means that if you are a corporate
treasurer, and you are not geared up to
prepared to receive in exchange for
If you want to combine a cash
investment – that is potentially lucrative
– with the receipt of collateral, and
on top, be able to re-use that collateral to
cover derivative obligations with no back
office burden, then you have it all
assess what kind of securities you can or
their funds, the rates on offer could also
be more attractive than the returns they
currently yield on their current deposits or
investments.
Morosini predicts significant growth
over the next six months in the triparty
repo market. That is not only because of
cannot accept, we can assist you by offering a range of baskets
the numerous requests the firm is receiving from corporates all around
measured on different levels of risk and return.”
the world for its services, but also because of its unique “one stop
The end result is that customers can choose to use these to deal
shop” offering that allows customers to quickly become active in the
with a wide range of banks spread across 110 countries.
secured triparty repo market.
Straight-through processing
lucrative – with the receipt of collateral, and on top, be able to re-use
To give corporate clients access to its services, Clearstream has also
that collateral to cover derivative obligations with no back office
partnered with 360T, a multi-bank, multi-asset platform based in
burden, then you have it all,” says Morosini.
“If you want to combine a cash investment – that is potentially
Germany. The 1,200 corporate and institutional customers on 360T now
have the opportunity to trade triparty repos with a range of banks on
the platform, with Germany’s Commerzbank and the airline easyjet the
first to strike such a trade on the system in October.
As Morosini explains, once the trade between the bank and the
corporate is agreed on 360T, it is routed automatically to Clearstream’s
collateral management engine.
“It is straight-through processed into our platform where we then
trigger the exchange of cash against securities,” he says.
“All the corporate treasurer has to do is to execute the transaction
on 360T and wire the funds to us for clearing. It is as simple as that.”
Growth is here to stay
Morosini believes the firm’s “all-in” straight-through processing
approach from trading through to collateral management gives
Clearstream the edge as the preferred provider for triparty repos.
Add that to the 22 years of experience that Clearstream has built up
since it was the first to launch triparty repos in 1992, and the firm’s
state of the art collateral management engine, which runs 24 hours a
day in real time, and Morosini is even more optimistic for the future of
the market.
Pascal Morosini is Executive Director, Global Head of GSF & Broker
Dealer Sales and Relationship Management, and in charge of
selling Global Securities Financing services to all Clearstream’s
clients. Global Securities Financing services include, triparty
collateral management, triparty Repo, triparty security lending,
securities lending and borrowing services.
Pascal Morosini joined the Cedel Group in 1994, starting in
Operations to deal with collateral valuation. In 1997, he moved to
the triparty Repo operations department of Cedelbank. In 1999,
Pascal joined Clearstream Banking’s Customer Relations
Department as a Global Securities Financing Sales Specialist. In
March 2003, Pascal joined the Clearstream Banking’s Origination
team in charge of selling all services of the company to
Continental European clients.
In January 2007, he became Head of GSF Sales and Relationship,
and in September 2010 he became Global Head of GSF & Broker
Dealer Sales and Relationship management, a section composed
of 16 GSF & Broker Dealer sales and relationship experts, spread
over Europe and Asia.
Pascal holds a Diploma in Banking Management from the “Centre
Universitaire de Luxembourg”. He has also participated in the
Clearstream Banking Global Markets training programme.
Indeed, he believes the trend for increased levels of participation
in the triparty repo market is here to stay.
After all, Morosini points out, on one side, it is the perfect solution
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For further information: www.clearsteam.com
Reprinted from: FX-MM · Volume 20 · Issue 1 · February 2014

4. Clearstream
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Are you looking for safe and efficient
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while maximising your cash returns.
gsf@clearstream.com