Tri-Party Agreement Prime Brokerage

Brokers will generally try to retain their (usually broad) rights to close the account as part of their brokerage contract with the client. Customers and lenders will generally agree. But customers may have fears that the actions of rushed brokers will trigger cross-acceleration rules in the configuration. In some cases, a lender may have the right of prior notification and perhaps the right to veto any closure in order to avoid a closure in circumstances that reduce the lender`s recovery. This approach can create difficulties for a broker, as the brokerage account is probably their only source of recovery and any delay to closing can expose the broker to significant risk. As a result, brokers will generally resist this approach. We offer a single-part three-part deposit account solution to improve efficiency. Our platform uses the operational integration between the first brokerage and the deposit by automating the movements of guarantees to and from your deposit account. Our comprehensive solution provides access to securities lending, execution, retention and all the service and financing functions you need to manage eligible hedge funds, 40 Act funds or pension funds. The step of strengthening risk management among primer brokers was triggered by the collapse of Lehman Brothers, which could even involve untaminated securities in the insolvency process. The new model generally involves the separation of responsibilities between brokers and deposits, with custodian banks holding long-term assets and providing financing and credit to brokers. In this developing model, which allows each party to focus on its strengths, a bank manager can play the role of collateral manager for both the hedge fund and the first broker. Assuming it is comfortable with the broker, a lender can probably live with the priority of close-out clearing and broker security rights, as they are applicable to specific hedging trades.

The lender is interested in insuring the net profits of the client on these hedges, in contrast to the customer`s losses due to the broker. One of the lender`s concerns is that the broker and client may engage in other unrelated futures. The brokerage agreement generally provides that the broker`s clearing and margining rights apply to all accounts, so that the broker can use a surplus on one account to compensate for a deficit on another account. In order to prevent the security gains from being used to cover other losses, the lender will likely require (1) that the transactions that finance that lender be held in a separate account and (2) the broker`s hedging and margining rights apply to that account from all other accounts held by the client with the broker. Someone who manages a tripartite collateral agreement. A useful type if you want to provide guarantees via a pool of renewable guarantees and retain a substitution right. Some useful discussions are taking place within the framework of the Financial Collateral Regulations.