Finadium: Triparty Client Satisfaction – A Finadium Survey

This Finadium 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. This report presents the results of interviews with triparty clients in the US, Canada and Northern Europe. The survey covers 40 front and back office professionals across 26 firms.

Triparty may be the most important business in capital markets that the fewest people have ever heard of. The nature of the business can be simplified as outsourcing back office processing for collateral management, but the scale and breadth of triparty have made it a critical part of how markets function across repo, securities lending, OTC derivatives and structured products. A frequent comment from users is that without triparty, their businesses would cease to operate. This is a testament to how central the service has become to the world’s markets.

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.

A direct link for Finadium subscribers to this report is

For non-subscribers, more information is available here.

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