Repo Markets in Europe: Role of Counterparty Clearing and Triparty Repos

by Anshuman Jaswal, PhD, April 4, 2011
EMEA

Abstract

Repos are a vital tool for both central and commercial banks to manage liquidity in the financial system. In Europe, we have seen stronger volumes in the last two to three years, contrary to the decline in volumes in a number of asset markets.

In a new report, Repo Markets in Europe: Role of Counterparty Clearing and Triparty Repos, Celent examines the European repo market and its growth. Although the crisis has shaped the recent evolution of repo market, it continues to cement its position as the leading repo market globally.

The European repo market has shown tremendous resilience during the financial crisis. The turnover in the market fell to €4,633 billion in December 2008 but has recovered, reaching €6,979 billion in June 2010.

“The volumes of the leading electronic trading platforms have continued to grow in the last few years,” says Anshuman Jaswal, Celent Senior Analyst and author of the report. “Eurex’s Euro GC Pooling has become the standard for a timely and innovative product across the OTC market.”

This report looks at the various types of transactions in the European market and compares the levels of electronic trading and efficiency of the repo markets vis-à-vis some of the other product segments, such as interest rates and currency swaps. The report then provides a breakdown of the market in terms of the bilateral and triparty repos and also the geographical composition of collateral used. Separate chapters discuss central counterparty clearing and triparty repos in Europe. Finally, the report explores the level of liquidity, as well as main features of the leading electronic trading platforms in Europe, namely, ICAP, MTS, and Eurex.

The 34-page report contains 21 figures.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

5

Market Overview

7

 

Market Participants

11

Counterparty Clearing

13

Triparty Repos

16

Electronic Trading Platforms

19

 

ICAP

22

 

MTS

23

 

Eurex

25

Conclusion

28

Leveraging Celent’s Expertise

30

 

Support for Financial Institutions

30

 

Support for Vendors

30

Related Celent Research

31

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