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Tri‐Party Repo Infrastructure
Task Force Report

Section 2:

Summary List of Task Force Recommendations

Operational Arrangements – The Task Force Recommendations set out the milestones for the industry action
plan developed and agreed by the Task Force to eliminate to the greatest extent possible Clearing Bank
extensions of intraday credit by enhancing operational arrangements in the tri‐party repo market.
Recommendations are addressed to all tri‐party repo market participants unless specified.


Implement operational enhancements to achieve the “practical elimination” of intraday
credit by the Clearing Banks, where “practical elimination” is defined as a point beyond
which the residual amounts of intraday credit extensions are both small and can be
governed by transparent bilateral arrangements, known in advance to participants 5 .

1A. Clearing Banks to provide project plans in relation to their implementation of robust
automated collateral substitution (“auto‐substitution”) capability.

1B. Eliminate remaining sources of ambiguity or inaccuracy in tri‐party repo booking
procedures and trade communications to the Clearing Banks, including information
related to the term of the transaction.


30 Jun 2011

15 July 2010

31 Aug 2010

1C. Agree to standardized intraday settlement time(s) for maturing repo trades (e.g.,
Morning Settlement, End of Day Settlement), that will be implemented following pre‐
requisite enhancements (e.g., auto‐substitution).

31 Aug 2010

1D. Agree solution(s) for three‐way, real‐time, point of trade confirmations for tri‐party
repo transactions, inclusive of discussions with third‐party vendors.

15 Oct 2010

1E. Clearing Banks to complete development of software to support auto‐substitution
capability and confirm timelines for full implementation.

15 Feb 2011

1F. Dealers and Cash Investors to confirm that internal processes related to all aspects of
tri‐party repo are prepared for the operational enhancements recommended in this

15 Feb 2011

1G. Implement market‐wide, three‐way, real‐time, point of trade confirmation
solution(s) which memorializes legally binding repo transactions entered into
between Cash Investors and Dealers.

15 Apr 2011

Dealers and Cash Investors to undertake regular due diligence reviews of Clearing Banks
that cover, at a minimum, operational and contractual conformity, adherence to
collateral allocation rules, and collateral pricing methodologies.



Market participants should target the reduction in intraday credit to be less than 10% of a Dealer’s notional tri‐party book (representing the
estimated portion of a Dealer's book that reaches final maturity and is not rolled on a given day).
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Dealer Liquidity Risk Management – The Task Force Recommendations support other assessments of the
financial crisis in emphasizing the importance of stronger liquidity risk management.


Dealers need to incorporate lessons from the financial crisis experience related to tri‐
party repo in making appropriate improvements to liquidity risk management and



Dealers should not assume that short‐term tri‐party repo financing with all of their
counterparties throughout all market conditions is inherently stable.



Dealers and Clearing Banks to assess and clarify terms for the potential availability of
secured intraday credit facilities (both discretionary and committed) to mitigate the
liquidity risks associated with maturing repo trades.

15 Nov 2010

Margining Practices – The Task Force Recommendations support a broad strengthening of margining practices,
based on the principles that margins should be risk‐based, should not be pro‐cyclical, and should be based on
objective/transparent criteria.



Cash Investors, Dealers, and Clearing Banks to determine appropriate collateral margins
in line with the principles set out in Section 6 of this Report, taking note of monthly Tri‐
Party Repo Statistics to be published on the Federal Reserve Bank of New York website.

Clearing Banks to continue to share information on intraday margin methodologies and
processes with respective Dealers.



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Contingency Planning – The Task Force Recommendations support improving the preparedness of Cash Investors
and the tri‐party repo market to cope with a Dealer default.


Cash Investors to undertake regular stress tests of tri‐party repo counterparty exposures
that consider a default of the largest repo counterparty together with potential changes
in the market value of the underlying collateral.



Cash Investors to put in place and regularly review contingency plans for a Dealer default
that cover, at a minimum, a process for effectively managing collateral, including a plan
to manage liquidity and risk exposure during the liquidation process.

15 Jan 2011

10. Relevant industry associations in conjunction with their constituents are encouraged to
publish comprehensive Best Practice guidance for Cash Investors.

30 Sep 2010

11. DTCC and its affiliates to work with other market participants to maximize the potential
for offsetting of positions in the event of a Dealer default; DTCC and/or other interested
parties can provide a viable collateral liquidation management service for those Cash
Investors wishing to delegate these activities.

30 Nov 2010

12. All market participants to continue exploring additional concepts that have the potential
to add to the stability and resilience of tri‐party repo financing and/or reduce the
potential for collateral “fire sales” in the event of a Dealer default.


Transparency – The Task Force Recommendations are intended to increase transparency with respect to the size,
composition, and concentration of the tri‐party repo market, the range of margins applied, and the valuation
methodologies applied to the underlying repo collateral.

13. Initiate monthly publication, via the Federal Reserve, of aggregate statistics on tri‐party
repo collateral and Cash Investor margin levels, with disclosure by asset class, based on
information provided by the Clearing Banks. (See Table 1 for a pilot version.)

14. The Task Force will establish a working group of valuation specialists across tri‐party repo
market participants to evaluate collateral pricing methods and make recommendations
for improvements, including the feasibility of same‐day pricing.

30 Jul 2010

15 Oct 2010

15. Cash Investors to regularly validate tri‐party collateral for pricing, appropriateness, and
classification. Dealers to regularly compare collateral marks on their own books and
records with vendor prices provided by the Clearing Banks.


16. Dealers to inform Cash Investors and Clearing Banks in cases where the Dealer’s marks
are materially below the vendor prices provided by the Clearing Bank.


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