BNY Mellon, a global leader in investment management and investment services, and CME Group, one of the world's leading and most diverse derivatives marketplaces, today announced a collaboration that will provide investors with important new interest rate hedging tools that leverage BNY Mellon's strengths as a U.S. Tri-Party Repo agent and custodian and CME Group's leadership as a derivatives marketplace.
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. CME Group futures related to these indices will allow investors to hedge risk on short-term collateralized loans and other nearly risk-free interest rate exposures. The futures products are scheduled to launch in 2015, pending regulatory review, and will be listed by and subject to the rules of the Chicago Board of Trade (CBOT).
Based on the approximately $400 billion[1] per day of overnight repo transactions in the specific index asset classes processed daily on BNY Mellon's Tri-Party Repo platform, the new BNY Mellon U.S. Tri-Party Repo Indices will provide investors with an entirely new, highly transparent transactional-based benchmark. Currently representing approximately 85 percent of the U.S. Tri-Party Repo market[2], transactions on the BNY Mellon platform reflect the investment activities of a diverse array of market participants.
"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," said John Vinci, Managing Director and Head of BNY Mellon’s Broker-Dealer Services Product Management and Strategy. "This collaboration promises to provide investors with great new tools to help hedge interest rate exposure – we'll be giving investors access in a world-class derivatives marketplace to products that reflect our unmatched ability to track and report on activity in the Tri-Party Repo space."
“We are pleased to partner with BNY Mellon to deliver futures contracts that enable the marketplace to access a nearly risk free repo interest rate benchmark, and to provide our customers with more choices to manage their interest rate risk management needs,” said Sean Tully, Senior Managing Director of Financials and OTC at CME Group. “CME Group is a natural home for futures related to BNY Mellon’s Tri-Party Repo Indices because of our unique ability to offer portfolio margining with one of the world’s largest interest rates futures open interest pools, including Eurodollars, Fed Funds, and U.S. Treasury Note and Bond futures.”