Memo #
24769

Three-Way Confirmation Process And New Settlement Window Proposed For Tri-Party Repo Market; 12/15 Conference Call
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[24769]

 

December 9, 2010

TO: MONEY MARKET FUNDS ADVISORY COMMITTEE No. 67-10
SEC RULES COMMITTEE No. 62-10 RE: THREE-WAY CONFIRMATION PROCESS AND NEW SETTLEMENT WINDOW PROPOSED FOR TRI-PARTY REPO MARKET; 12/15 CONFERENCE CALL

 

Earlier this year, the Tri-Party Repo Infrastructure Reform Task Force (“Task Force”) issued a report making recommendations to address weaknesses in the tri-party repo market infrastructure that were exposed during the recent financial crisis. [1]  On December 3rd, the Task Force’s Operational Arrangements Working Group published proposals for processes and workflows to implement some of the Task Force recommendations, as well as a proposed implementation schedule. [2]

The Task Force is inviting public comments on the proposals.  Comments are due by January 14, 2011.  We will hold a conference call on Wednesday, December 15th at 4:00 p.m. Eastern time to discuss possible ICI comments on the proposals.  If you would like to participate on the call, please contact Gwen Kelly at gwen.kelly@ici.org to obtain the dial-in information.  If you are unable to participate on the call but have views to offer, please contact Frances Stadler at frances@ici.org prior to the call.

In brief, the proposals include the following:

  • Three-Way Trade Confirmation – To support the diversity of the cash lender population, the proposal includes three distinct confirmation workflows, which would vary from limited technology requirements to more sophisticated messaging technology.  The Task Force is proposing minimum parameters to facilitate deal matching.  Market participants would be required to conform to the process by August 2011 in order to participate in the tri-party repo market.
     
  • Standardized Settlement Window – The Task Force proposes to implement a standard, late-day settlement window for the unwinding of maturing deals, beginning at 3:30 p.m., and the settlement of new deals.  Transition to the new 3:30 p.m. - 4:30 p.m. settlement window would be implemented in phases beginning in July 2011.
     
  • Implementation Schedule – The Task Force proposes an implementation schedule for required activities from all market participants to achieve the “practical elimination” of  intra-day credit provided by the clearing banks and corresponding roll out periods.

The document describing the proposals sets forth some specific questions for public comment (see p. 21).   It also includes a list of frequently asked questions organized in the following categories:  investors; dealers; and deal matching (see pp. 23-28).

 

Frances M. Stadler
Deputy Senior Counsel

endnotes

 [1] See ICI Memo No. 24301, dated May 18, 2010.

 [2] The proposals and a related press release are available at http://www.newyorkfed.org/tripartyrepo.