About Tri-party Repo Platform

A repo is a sale of securities coupled with an agreement to repurchase the securities at a specified price on a later date. It is economically similar to a secured loan. The cash lender loans cash to a borrower and receives the borrower's securities as collateral. The proceeds of the initial securities sale can be thought of as the principal amount of the loan, and the excess paid by the cash borrower to repurchase the securities corresponds to the interest paid on the loan, also known as the repo rate. The difference between the amount of cash loaned and the value of the collateral posted is called the "haircut" or "margin" and it functions act as a buffer for the lender against short-term variations in the value of the collateral.

Tri-party repo is a type of repo contract where a third entity (apart from the borrower and lender), called a Tri-Party Agent, acts as an intermediary between the two parties to the repo to facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.

The aim to introduce Tri-party repo was to improve liquidity in the corporate bond repo market, thereby providing an alternate to Government securities repo. Tri-party repos are transacted as per the terms of Tri-party repo (Reserve Bank) Directions Tri-party repo (Reserve Bank) Directions, 2018 Amendment dated November 28, 2019, or such other directions issued by the Reserve Bank of India (RBI) from time to time.

NSE has agreed to offer the Tri-party repo product of ARCL for trading on NSE’s Tri-party repo Market Trading Platform. ARCL is a limited purpose clearing corporation (LPCC) and is recognized by SEBI under Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (“SECC Regulations, 2018”). In this product, ARCL will be responsible for Clearing & Settlement, Product Specifications, and will play the role of Tri-Party Agent.