Advantages

Guaranteed Repo is multi-jurisdictional and multi-asset. These features yield several benefits: reduced cost, market-wide front to back integration, access to the Bloomberg Community allowing for scalability, standardized documentation, reduction in intraday liquidity usage, minimizing risk-weighted asset usage, reducing counterparty concentration, eliminating the backstop liquidity commitment, reducing system-wide leverage, and enhancing operational efficiency.

Front to back integration

Market-wide integration supports consistent workflow across all jurisdictions. Benefits include standardized documentation and uniform electronic trading protocols and post-trade collateral management services. Clients retain their existing custody and prime broker relationships, and complete reviews and onboarding across jurisdictions at the same time.

Bloomberg community

Participants can build a dynamic network for trading. Bloomberg’s reach means Guaranteed Repo has a deep pool of potential counterparties. This reach is further enhanced by the electronic trading and messaging services available on the Bloomberg Terminal. Users can develop and manage a large number of relationships highly efficiently. Euroclear’s participation facilitates the expansion of relationships while limiting operational burdens.

Standardized documentation

Guaranteed Repo uses proprietary master repurchase agreements (MRAs and GMRAs) and associated Guarantees, which were structured in collaboration with end users, end providers and guarantors. The solution has innovated this structuring to address the nuances in these documents that have generally prevented standardization in the past. Counterparties can be readily added and all the documents are maintained electronically.

Reducing intraday liquidity usage

The one-step settlement model of the solution reduces intraday liquidity usage because it eliminates one leg from settlement. Also, Euroclear matches the timing of settlement instructions while managing settlement for end users and end providers, which increases the potential reduction in intraday liquidity usage. The solution avoids the need for triparty and delivery-vs.-payment models with greater intraday liquidity needs.

Reducing bank risk-based capital

Guaranteed Repo only exposes banks to the credit risk of end users. As a result, it reduces their risk-weighted assets (RWAs) and related risk-based capital.

No backstop liquidity commitment

Under Guaranteed Repo, liquidity requirements are based on liquidity coverage ratio standards, net stable funding ratios (NSFRs) and internal metrics, which are generally minimal for high quality liquid assets. Participants use internal metrics to determine and meet their liquidity requirements, rather than having to commit to backstop liquidity (as CCPs require).

System-wide leverage reduction

Since guarantors no longer act as principals to transactions on Guaranteed Repo, system-wide leverage is reduced.

Enhanced operational efficiency

Bloomberg and Euroclear provide services that make Guaranteed Repo an extremely efficient solution. Electronic trading reduces many of the risks of voice- and email-based trading. Euroclear represents both parties to trades and acts as a matching agent, which reduces post-trade risk. In addition, the solution has consistent pricing sources, protocols and dispute mechanisms, which decrease uncertainty in the post-trade settlement process.