For a long time, we have been concerned by the common practice in Over the Counter (“OTC”) derivative markets of end users conducting all their hedging activity with a small group of their “relationship” banks.

Corporate finance theory has long established that companies should maximise their Enterprise Value no matter who the shareholders are.

Banks have traditionally provided funding and hedging acting as principals. The financial crisis has critically reduced banks’ appetite for risk, thus often reducing their role in several traditional investment banking functions to that of ‘matched brokers’.

Secured Cash Services

TradeRisks’ Secured Cash Services (TR SCS) allows clients to deposit cash whilst receiving Gilts as collateral. Such collateral mitigates the counterparty risk associated with bank deposits or other traditional means of cash management. TR SCS achieves this by entering into Repurchase Agreements (“Repo’s”). Under a Repo agreement the cash deposited is returned, in exchange for the collateral held, on a specified date, along with interest accrued at the Repo rate agreed at the time of deposit.

Because they address counterparty risk, Repo’s have now largely replaced unsecured lending between Financial Institutions. The Bank of England uses Repo’s as its tool for managing money market operations. However, Repo’s are not generally available to non-Financial Institutions. TR SCS is designed to address this gap by allowing its clients to manage cash while benefi ting from the fl exibility and security of Repo.

TR SCS can be used by suitable institutional clients and can be accessed by signing a TR SCS Agreement.

For more information, please click here.

Secured Cash Services »