Sponsored Repo Program

The FICC Sponsoring/Sponsored Member program goal is to provide bank netting members with expanded FICC/GSD financing options. Using Rule 3A of the GSD Rulebook, well-capitalized members with at least $5 billion in equity capital, can act as “Sponsoring Members” for certain qualified entities (“Sponsored Members”).

The program ultimately permits the Sponsoring Members to act as a processing agent on behalf of Sponsored Members. This is accomplished by establishing an autonomous Omnibus account, separate from the Sponsoring Members FICC/GSD netting account, for all of its Sponsored Members activities.

The current program limits participating entities to registered investment companies who are qualified institutional buyers and have a willing FICC/GSD Sponsoring Member.

The proposed rule change will allow an expanded group of market participants to engage in FICC financing activities as Sponsoring Members. This includes entities such as dealer netting members, Futures Commission Merchant netting members, and foreign netting members.

Broadridge has made comprehensive changes to fully support all aspects of this program.

BENEFITS

• Provides central counterparty (CCP) risk mitigation: For netting eligible trades, FICC will become the novated counterparty. This decreases liquidity risk in stressed and failed counterparty scenarios, provides independent risk management and enhances the guaranty of settlement completion
• Lowers capital charges and provides balancesheet relief: Sponsored Repo uses capital more effectively because Sponsoring Members can potentially reduce balance sheet exposure by taking smaller capital charges than would be required without a CCP
• Alleviates borrower constraints: Central clearing of trades through FICC may permit the use of lower risk weights for capital ratios and achieve capital usage reduction through the netting process
• Permits growth of “on-loan” balances and income: Lending through FICC may permit institutional investors to achieve growth by shifting demand onto cleared CCP channels with settlement guarantees
• Expands client base: Provides Sponsoring Members with increased access to overnight financing funds, which helps promote their interaction with an expanded client base

ENHANCED FUNCTIONALITY

Broadridge clients can leverage our updated impact functionality to participate in the FICC’s new Sponsored Repo Program. This program benefits participants by permitting expanded financing opportunities with qualified non-FICC/GSD netting customers.

• Enables the provision of modified messaging to both the Sponsoring Member’s and the Sponsored Members’ flip trade to FICC
• Identifies executed eligible activity between the Sponsoring Member and the Sponsored Member; this activity will be submitted for comparison and netting
• Enhances messaging to identify specific counterparty symbols for FICC Sponsored Members