State Street Corporation has announced that it has sponsored a record US$140bn in repo investment volumes as a result of its partnership with the Fixed Income Clearing Corporation (FICC). In 2005, State Street partnered with FICC to launch its Sponsoring/Sponsored Member Repo Program, whereby a bank netting member of the clearing house could sponsor eligible US mutual funds to clear their repos with FICC.
With the evolution of the FICC programme, and specifically the rule changes in 2017 and 2019 permitting additional sponsoring and sponsored member client types, FICC’s aggregate cleared repo and reverse repo volumes have risen substantially.
As a designated Systemically Important Financial Market Utility (SIFMU), FICC is required to maintain prescribed risk management standards and is subject to heightened regulatory oversight, factors that play a critical role in participants’ assessment of their counterparty risk. US money market funds (MMFs) have been particularly active buy-side participants recently; and the bank says that corporations, hedge funds, insurance companies, and state and local governments are taking notice.
“The growth in sponsored member repo through FICC has been transformational in the actively managed cash marketplace, providing cash investors and cash borrowers critical and stable liquidity,” says Gino Timperio, head of Funding and Collateral Transformation at State Street. “I believe we're in the early stages of a sustained growth trajectory, from which our clients and the overall market will continue to benefit.”
“UBS was an early adopter of Sponsored Repo [with State Street],” says Rob Sabatino, head of Liquidity Investments at UBS Asset Management. “The growth of sponsored repo volumes within FICC highlights demand from both cash investors and borrowers for a highly efficient, centrally cleared solution and I anticipate the next wave of growth will be from corporations, local government investment pools, and offshore entities managing US dollars.”
State Street says that it continues to work closely with the FICC and other central clearing counterparties to expand the eligibility of cleared collateral options, jurisdictions and tenors, to further support clients’ liquidity and financing needs.
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