Shenzhen Stock Exchange launches Bond Pledge-style Tri-Party repo business


Shenzhen Stock Exchange

Shenzhen Stock Exchange (SZSE) and China Securities Depository and Clearing (CSDC) have officially released the Provisional Measures on Bond Pledge-style Tri-party Repo Transactions and Settlement (Provisional Measures) to further improve the mechanism for repo transactions and relevant services to market participants.

Meanwhile, to elaborate on and specify relevant matters in the Provisional Measures, SZSE also published the Guidelines on Bond Pledge-style Tri-party Repo Transactions (Guidelines), providing some guidance on participating in tri-party repo transactions to relevant market players. Relevant rules shall take effect as of July 30, 2018.

The tri-party repo business is a critical complement to the current bond repo business. Compared with bond pledge-style repo, the scope of collaterals under tri-party repo transactions is further expanded in that private placement bonds and asset-backed securities could also serve as collaterals.

Different from bond pledge-style negotiated repo, tri-party repo provides a series of collateral management services including pledged bond basket management, pledged bond selection, and daily market supervision and settlement to facilitate transactions between investing parties and the management of duration risks. The launch of tri-party repo business shall further increase the liquidity of the SZSE bond market, facilitate liquidity management for market institutions and perfect the mechanism for bond repo transactions.

SZSE and CSDC had solicited opinions from the market publicly with regard to the Provisional Measures in May 2018. Next, SZSE shall continue to enhance market training and investor education, and improve market participants’ understanding and risk awareness of tri-party repo business, ensuring that the tri-party repo business is carried out smoothly.

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Shenzhen Stock Exchange launches Bond Pledge-style Tri-Party repo business

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