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Industry roundup: 19 April

BNY Mellon adds cleared repo to its investment platform

BNY Mellon has announced that institutional clients are now able to invest cash in cleared repo through LiquidityDirect, the bank's short-end investment portal. The addition of cleared repo represents the next step in BNY Mellon's continuing plans to enhance the platform and its services to enable clients to invest in a wide variety of short-end investment products.

Cleared repo through the Fixed Income Clearing Corporation (FICC) has emerged as an important short-term investment option for liquidity providers, particularly since 2017 when changes in entry requirements increased the community of investors eligible to utilise the product, many of whom use LiquidityDirect today.

Sponsored membership enables sponsoring firms like BNY Mellon to provide cleared repo to end users that would otherwise be ineligible to access the FICC clearing house, enabling clients to invest and raise cash in cleared repo without the financial obligations of full clearing house membership.

Since BNY Mellon launched its sponsored member programme at FICC in June 2017, the sponsored cleared repo sector has enjoyed strong growth, climbing from approximately US$30bn in daily volume in early 2017 to peak at over US$525bn in March 2019. Daily volumes have remained consistently above US$200bn in recent months.   

The addition of cleared repo to LiquidityDirect broadens the range of short-term investments on the platform to include a secured, centrally cleared alternative that provides counterparty diversity and potentially enhances yields.

"With the addition of cleared repo - and with other vehicles still to come - we are demonstrating our ambition to build the venue into the market's leading short-end investment platform," says George Maganas, head of Liquidity Services at BNY Mellon. "Today, clients are looking for a single point of contact that both grants access to a wide variety of investment instruments as well as collateral management, treasury services and asset servicing capabilities. LiquidityDirect is that access point, and we are committed to connecting the dots for clients." 


J.P. Morgan uses blockchain technology to aid payment confirmation

J.P. Morgan has announced that it is using blockchain technology to improve funds transfers between banking institutions globally, including payments originating from Taiwan banks to beneficiary banks in other markets. Through improved information exchange related to such payments, the new solution called Confirm is expected to help reduce the number of rejected or returned transactions caused by mismatched payment details, lowering costs for both the sending and receiving banks.

By using Confirm - a global account information validation application on the Liink by J.P. Morgan - partner banking institutions, including Taiwan banks, will be able to request confirmation of the beneficiary account information and receive responses directly from other participating banks receiving the requests in near-real time. Once the information is validated, the payment may be sent through J.P. Morgan’s global clearing solution PayDirect to route the payment in the most efficient manner.

The efficiencies offered by the Confirm and PayDirect solutions are expected to help improve straight-through processing (STP) rates, increase transparency and enhance their customers’ end-to-end payment experience by reducing returns. Testing is under way with 12 Taiwan banks, including Taiwan Cooperative Bank, First Commercial Bank, the Shanghai Commercial & Savings Bank, Mega Bank, Taipei Star Bank, Taiwan Shin Kong Bank, CTBC Bank, for money transfers via PayDirect into Indonesia.


Turkey pushes back on crypto assets

Turkey's central bank, the CBRT, has concluded its studies on the regulation regarding the disuse of crypto assets in payments.

The study found that crypto assets entail significant risks to the relevant parties due to the following reasons:

  • They are neither subject to any regulation and supervision mechanisms nor a central regulatory authority.
  • Their market values can be excessively volatile.
  • They may be used in illegal actions due to their anonymous structures.
  • Wallets can be stolen or used unlawfully without the authorisation of their holders.
  • Transactions are irrevocable.

Recently, some initiatives have emerged regarding the use of these assets in payments. It is considered that their use in payments may cause non-recoverable losses for the parties to the transactions due to the above-listed factors and they include elements that may undermine the confidence in methods and instruments used currently in payments.

As a result, and citing the authority vested by the Law No:1211 on the Central Bank of the Republic of Turkey (CBRT) and the Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, the CBRT has introduced 'Regulation on the Disuse of Crypto Assets in Payments' to push back against the use of crypto assets in the Turkish economy.

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