Merrill Lynch has joined forces with the Bank of New York, today, to introduce tri-party “repo trading” to Canada. A “tri-party repo” is a loan transaction where securities held by a third party serve as collateral for a loan and effectively eliminate a cash investor’s need for a back office.

Tri-party repo has been popular in the United States since the 1970s, says Merrill, and
gained popularity in Europe throughout the 1990s. Recently, increasedclient interest in the safety and security of their funds have made tri-party transactions more attractive to cash lenders, says the firm.

“Demand in Canada among small and mid-size investors has been growing for investments with a high degree of safety and yield enhancement,” says Joanne
Feekery, Product Manager, Canada Short Term Trading Group, for Merrill Lynch
Canada. “With our global technology and product leadership we have been able
to meet this demand in Canada.”

Merrill Lynch Canada’s repo agreement offers a segregated account at a third-party custodian bank with identified securities as collateral. Merrill Lynch provides 100 percent collateral on invested cash, and the custodian bank determines and adjusts the value of securities on a daily basis. Institutions are required to carry an average account balance of $250,000.