GFI offers repo traders a new derivatives tool

New York-based interdealer broker GFI has added forward allocation general collateral (FAGC) repurchase agreements and corporate bond repos to its GFInet European trading screen.

The move makes GFI the first broker to offer both voice and online trading of the new FAGC derivatives products. GFI said the additions will give traders more time to decide which bonds they want to use in repo trades.FAGC repos allow traders to postpone the definition of the security to be delivered, as part of a general collateral repo trade, to a future date. GFI said this new flexibility will increase liquidity and allow short-selling, since traders will not have to commit to a particular bond at the time of the transaction. Usually, sellers of general collateral repo trades must surrender the underlying bond within an hour of a trade being executed. FAGC will grant sellers up to four working days to allocate a bond.

FAGCs will be traded as over-the-counter interest rate futures rolling over three months, six months, nine months and one-year periods. GFI worked with trading houses to create FAGC documentation, and conducts FAGC trading on a bilaterally settled basis.

The broker also added trading for corporate bond repos to GFInet, allowing euro, US dollar and sterling investment grade corporate securities repo trading online.

The launch is part of an upgraded version 2.3 of the GFInet repo trading screen, originally launched in August 2000. The system is currently used by 100 traders at more than 40 banks in Europe. The new release allows repo traders to increase order sizes after executing a trade, view total daily trade volumes per issue and engage in direct conversations with other traders online.

Michel Everaert, GFI’s London-based global head of product marketing, said the broker had no plans to expand the service into the United States.