Liquidity: Repo Market in Focus

Liquidity: Repo Market in Focus

In times of COVID-19, the provision of liquidity made headlines. Nerin Demir, Head SIX Repo Ltd & Securities Finance explains the background and shows how the new Triparty Agent from SIX is making the Swiss repo market more efficient and resilient than ever.

The provision of liquidity to businesses by banks was crucial to keeping Switzerland’s economy running properly during the COVID-19 crisis. “At the same time, they [banks] have to make sure to safeguard their own liquidity,” reports. This is putting pressure on the unsecured money market, the financial news portal writes. Banks that borrow money there from their competitors without depositing collateral have to live with volatile interest rates and equity capital costs. 

The secured money market, accordingly, is enjoying great popularity these days. It helps financial institutions to, among other things, comply with the Basel III liquidity coverage ratio requirement at all times. The secured money market is the liquidity lifeline of last resort, particularly in times of crisis. 

We at SIX operate the trading platform for the secured money market in Switzerland, which is known as the Swiss repo market. Around 170 banks and insurance companies, including the Swiss National Bank (SNB), are active in the Swiss repo market. The market participants borrow money from each other and at the same time deposit securities as collateral. They pledge to retract the collateral at a later date, and they pay interest on the amount of money borrowed. The SNB uses repo operations to supply the money market with liquidity. 

SIX performs another important core function in its role as a triparty agent. After a repo deal is concluded, we guarantee the applicable standards, monitor open transactions, value securities, and execute the collateralization fully automatically, thus building trust and averting disputes.

A New Form of Triparty Agent

Our new, comprehensive Triparty Agent system went into operation on 15 June 2020. Its innovative interface – the Collateral Cockpit – simplifies the management of collateral and makes it visualizable and very easily plannable also for traders. With just a few mouse clicks, repo market participants can employ their securities efficiently and tap new business opportunities. The digitalization of the processes involved relieves them almost entirely from having to intervene manually and thus also reduces operational risk. 

Be it during or after the COVID-19 crisis, SIX, with its new Triparty Agent, is making the Swiss repo market more efficient and resilient than ever.