State Street has confirmed the execution of the first transactions through its peer-to-peer repo programme, following the launch of this initiative in March 2021.
This programme facilitates overnight and term repurchase agreement transactions between buy-side firms, with State Street providing a guarantee for all repo trades that meet programme requirements.
This offers protection for repo buyers in the peer-to-peer programme against default of the peer repo seller.
State Street’s peer-to-peer programme aims to extend buy-side access to liquidity and secured investment opportunities, offering scale and flexibility, while complementing existing options available to buy-side firms through other channels.
This peer-to-peer network is founded on a legal framework that allows each programme participant to stand as either repo buyer or repo seller under the programme Master Repurchase Agreement, which defines the terms under which repo participants trade bilaterally with each other.
The first trade through the P2P platform, which SFT believes to have been completed last week, was executed between a large beneficial owner and a “non-traditional” investment manager.
Commenting on the advance of the peer-to-peer programme, State Street’s head of global markets funding and collateral Gino Timperio says: “The buy-side continues to seek greater control and optimisation of their trading opportunities and we are strategically committed to supporting the buy-side community.
“The market volatility that we witnessed during the spring of 2020 and the greater than US$1 trillion enrolled in the Federal Reserve’s Reverse Repo Program only confirm the critical need for more sources of liquidity and secured investment opportunities remain in high demand,” adds Timperio. “We continue to prioritise our clients’ access to a broader range of trading counterparties, with peer-to-peer repo complementing our longstanding sponsored repo offering via the Fixed Income Clearing Corporation.”
Leslie Womack, State Street’s head of product development for global markets funding and collateral, adds: “A key factor to structuring the product offering is the constructive input we received from a diverse group of clients on our programme agreements, as well as from S&P Global Ratings, which affirmed that the agreements are consistent with State Street’s guaranty, which meets its principles for credit substitution such that the credit quality of an agreement with an unrated counterparty would be based on the credit rating of State Street as guarantor.”
