Global Repo Market: Next Stop, Collateral Management

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27 January 2014


Repo volumes are still lower than their pre-crisis level, with US average daily amount outstanding at US$4.5 trillion (source: SIFMA) and the European just below €5.5 trillion (source: ICMA), and they are on a downward trend. The future of the repo market thus does not seem very bright at first.

Whereas the structure of the US repo market is extremely mature, the European dealer-to-client repo market needs to find its path between the many initiatives that have been recently launched, whether tripartite or bilateral, and whether centrally cleared or not.

Globally there have been strong initiatives to calculate and publish benchmark indices for secured funding with general collateral, with more easily achieved results in the US than in Europe due to the fragmented nature of the European market.

Meanwhile the myriad of global and regional regulations that have direct or indirect impacts on the Repo market, will have further dramatic chain effects on the overall capital markets ecosystem.

“Repos have been a very technical and segregated area of market participants until recently but are crucial in the collateral management value chain” says Joséphine de Chazournes, Senior Analyst and author of the report. “They represent today an opportunity: market players that have Repo skills can leverage them to offer collateral servicing.”

In this report Celent provides a global update on the recent volumes and market structure developments of the Repo market. We also explain the central role in the collateral management value chain that repos have picked up further to the pre-trade and post-trade market infrastructure changes, and we provide clues on how to leverage the repo skillset in the future infrastructure.