June 2022

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This survey of triparty clients in North America and Europe finds that triparty is critical to the efficient functioning of repo, securities lending and OTC derivatives collateral movements, and that users would like to see progress in types of digitization and interoperability. The survey covers 40 front and back office professionals across 26 firms.

Conversations with clients of large triparty agents show that triparty supports important nuances to transactional activity, which in turn have impacts to money markets, securities lending agent access to non-cash collateral, central counterparty (CCP) investments of margin and default funds, and ultimately government monetary policy. Any survey of triparty clients must consider the operational activity of triparty at a high level but must also drill into how services work, why they are constructed in certain ways, and what clients want as their businesses evolve. This is a market where details matter, and seemingly small changes like time of day for settlement can mean large impacts to market behavior.

Dealers and prime brokers pay the bill in triparty while cash providers and agent lenders receive these services for free. The economic argument is that the sell-side receives most of the benefit, but our survey shows this is not always true. While we do not expect a change to the economic model of triparty any time soon, the emergence of new services like ESG flags for collateral suggests that the range of benefits is changing or has changed. That could create new conversations about who triparty benefits and who should be responsible for the cost.

This report should be read by any market participant using triparty services across repo dealers, stock loan desks, money market funds, securities lending agents, CCPs, hedge funds and other cash and collateral providers. Regulators and technology firms should also benefit from a greater understanding of client needs in this space.

Table of Contents

  • Executive Summary
  • Why Survey Triparty Clients
    • – Methodology
  • Scale and Scope of Triparty Usage
    • – Choosing a Triparty Agent
  • Client Opinions of Triparty Services
  • Business Planning for New Developments
    • – The Importance of Triparty Digitization to Clients
    • – Should Triparty Manage ESG Flags?
  • Opportunities for System-wide Improvement
    • – Who Pays the Bill?
    • – Other Service Considerations
  • About the Author
  • About Finadium LLC

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