Mandatory changes introduced this week will bring
the US tri-party repo market more in line with the European
Starting Monday August 29 the market’s
clearing banks (Bank of New York Mellon and JPMorgan Chase)
must stop using the daily unwind process, whereby they extend
credit to the buyer while the seller has access to its
collateral, and start using an auto-substitution process.
The new process allows the seller to make daily,
targeted substitutions of its collateral on a delivery verses
payment basis. Transactions won’t have to be
unwound, meaning clearing banks don’t continue to
experience huge intraday credit exposures.
"It increases the integrity of the process and reduces the