The 1st tri-party repo trading was completed in the bond market of the Shanghai Stock Exchange (SSE) on May 9, 2018, symbolizing the official launch of the tri-party repo business of the SSE. On the first day, smooth operation has been seen in the tri-party repo market. It is learnt that 7 institutions, including Tianhong Asset Management, Everbright Securities, Guotai Jun'an Securities, CITIC Securities, GF Securities, Industrial Securities and CIB Fund Management, participated in the trading of tri-party repo business. A total of 8 contracts were concluded on that day, with the total trading amount of RMB370 million, the trading period between 1 to 7 days, and the interest rate between 3.0% and 3.3%. Besides, there is repo financing based on interest rate bond basket and high-grade public offering bond basket and that based on such high-grade private placement bond basket as asset-based securities (ABS), presenting a wide range of collateral bond baskets. And all kinds of collateral bonds can engage in financing via the tri-party repo business.
The SSE and China Securities Depository and Clearing Co. Ltd. (CSDC) jointly issued the "Interim Measures for Trading and Settlement of Bond-collateralized Tri-party Repo" on April 24. Afterwards, the SSE released the "SSE Guideline on Business in Bond-collateralized Tri-party Repo", and the CSDC released the "Guideline of CSDC Shanghai Branch on Business in Bond-collateralized Tri-party Repo". The launch of tri-party repo business is of great significance to build a multi-level repo market, facilitate the liquidity management of financial institutions and promote the sound development of the bond market, and it is also an important measure of implementing the key task of preventing and resolving financial risks determined at the Central Economic Working Conference. After the issuing of the relevant rules, market professionals have made positive comments on the tri-party repo for enhancing the liquidity of the bond market and expanding the financing channels of financial institutions.
The total repo trading volume of the SSE was RMB243 trillion in 2017 and the average daily trading volume reached nearly RMB1 trillion. The tri-party repo is a key sector for the SSE to improve its repo ecological chain. Previously, the SSE has launched the collateralized repo and the agreed repo. The former is relatively standard while the latter is more flexible. The tri-party repo is in the middle of them and attempts to seek a balance between safety and convenience by summarizing the experience of over two years of the collateralized repo and agreed repo and asking a third party to make centralized and professional management on collaterals. Besides, compared with the collateralized repo, the collateralized bonds in tri-party repo has been expanded to all kinds of bonds of the exchange, including the non-publicly offered corporate bonds and ABS; and compared with the agreed repo, the standard and discount rate of the collateralized bonds are set up uniformly, and the third party provides the management service for collaterals and the market-to-market service, which will improve the trading efficiency and intensify risk control. In addition, the tri-party repo adopts the investor suitability management and sets up more strict access threshold against a financing party, and participants can make a white list of counter-parties by themselves.
According to relevant official of the SSE, the SSE will continue to intensify the market expansion and service of the tri-party repo business, keep optimizing relevant trading settlement mechanism according to market opinions, further enhance the operation efficiency of the tri-party repo business, and attract more market institutions, thus making the tri-party repo business an important channel for the short-term financing of financial institutions.