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Custodian bank BNY Mellon and derivatives exchange company CME Group have partnered to provide a new interest rate hedging tool, the U.S. Tri-Party Repo Indices, officials say.
BNY Mellon’s role in the collaboration will be to prepare and provide daily U.S. tri-party repo indices that reflect overnight interest rates on tri-party repo transactions collateralized by U.S. treasuries, agency mortgage-backed securities and U.S. Agency debt, according to a company statement. CME Group will launch futures products based on those indices in 2015 pending regulatory review, allowing investors to hedge risk on short-term collateralized loans and other interest rate exposures.
BNY Mellon’s platform currently accounts for roughly 85 percent of the $400 billion U.S. Tri-Party Repo market, the statement says.
“These new tri-party repo indices reflect our commitment to leveraging BNY Mellon’s thought leadership and technological strengths to increase the levels of transparency and efficiency in the financial services industry,” says John Vinci, managing director and head of BNY Mellon’s broker-dealer services product management and strategy, in a statement.
The collaboration focuses on investors that need to hedge interest rate exposure via derivatives marketplaces and need the ability to track and report tri-party repo activity, Vinci adds.
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