No respondents accepted gold. Asked for the percentage split of their tri-party activity by term, the aggregated response was: 38% overnight; 14% one week; 15% one month; 12% three months; 4% six months; 6% more than six months; and 11% open. Most respondents covered Western European markets (32%), followed by North America (22%), Asia Pacific, developed (16%), emerging Europe (10%), Asia Pacific, emerging (8%), Latin America (5%), Middle East (4%) and Africa (3%).
Respondents to the survey were asked to give reasons for adopting the triparty model. The most popular reason for adopting tri-party was highly ‘automated process’ – for which almost half, 46%, gave a top importance rating of 7. This was followed by: automatic substitution of ineligible collateral (44%); daily margining (40%); and more sophisticated eligibility filters (37%). Considered relatively important reasons were: book entry environment (31%); access to new counter parties (28%); accuracy of pricing (28%); and collateral re-use (23%).
Considered less important reasons were: better reporting (20%); supports more diverse collateral types (17%); and new markets (12%). Respondents were also asked which areas of tri-party needed improvement.
Among areas cited were: work with local regulators and exchanges to get more emerging markets on board such as Korea and Taiwan; netting of tri-party transactions at a client level and substitution capabilities; valuation of structured finance securities such as ABS and CLOs; late return of funds impacting management of cash; STP instructions; fails handling; static data; supported eligibility criteria, as no agents can apply haircuts based on duration for fixed income instruments, only maturity; better reporting and quicker implementation of collateral schedules; more transparency around real time reporting; link between different triparty agents for collateral exchange; and ability to manage/change eligibility criteria more dynamically/quicker and with greater granularity.
METHODOLOGY
Commercial/private banks, broker/dealers, hedge funds, custodians, money market funds, pension funds, insurance companies, corporates, central banks and mutual funds were asked to rate their tri-party providers across a number of service categories, on a scale from 1 (very poor) to 7 (excellent).
Service category tables
For each provider, all respondent scores in each service category were averaged to give a single score per service category. Additional service category tables were added this year: ability to create bespoke schedules; ability to manage equities as collateral; and implementation of collateral sets schedule. All tables are presented in the magazine:
Ability to create bespoke schedules
Ability to manage equities as collateral
Access to counterparties
Accuracy of margin calls
Breadth of market coverage
Breadth of supported eligibility criteria
Collateral re-use/re-hypothecation
Dividend collection
Handling of fails
Implementation of collateral sets/schedules
Level of STP offered
Quality of client service
Quality of reporting/client interface
Quality of static data
Substitution capability
Timeliness of margin calls
Timeliness of settlement
Overall table
Tri-party providers required a minimum of 10 responses to qualify in the overall table and qualify in a minimum of two regions. Each respondent’s scores were averaged to give a final respondent score.
Regional tables
Each of the regions required a minimum of five responses. The respondent’s location was used when calculating the regional tables: EMEA, Americas and Asia Pacific.