A Tri-Party Repo is a Repo but with 3 parties! OK, OK, a Tri-Party Repo is an

evolution of the Repurchase Agreement, or Repo, which is a financing trade. In

a Repo, the buyer and seller will agree to allow the seller to repurchase the

asset (usually a bond) from the buyer at a specified price (guaranteeing the

buyer a profit) on a specified date. So as long as the value of the asset is

greater than the purchase amount, this is a virtually riskless transaction for

the buyer. What we do here is to create a 3rd party to the transaction, a

custodian, who holds the asset and makes sure that the value, or margin amount,

is maintained. From there it gets rather complicated pretty quick, but that is

the basic idea. There is a developing retail repo market for small

corporations, and high net worth individuals (any OMEGA's?). The yields are

lower (though higher than bank deposits or money market funds) and investments

start around $100,000. Daily liquidity and the security of collateralization

are the key factors in this market.