SFE Clearing, the clearing and settlements arm of Australia's SFE Corporation Limited, has launched a new central counterparty bond and repo clear service (BRC), with over $24 billion in trades settled in the first two weeks of trading.
According to Robert Elstone, CEO and managing director of SFE, the new service is the first implementation of central counterparty clearing for the over-the-counter debt market in Australia and the Asia Pacific region, and only the fourth in the world.
BRC will provide customers with cost and credit efficiencies previously available to futures markets only, including balance sheet netting, reduced credit risk and settlement costs, and a range of margin off-set opportunities.
Traditionally the wholesale market has settled transactions directly between the two parties involved in the trade, with bonds delivered against receipt of cash via a central securities depository (CSD). With BRC, SFE Clearing becomes the counterparty to each trade, mitigating risks to the trading parties and reducing the amount and number of settlements, as purchases and sales, repos and reverse repos are netted.