There has been a recent observation that the uptake on sponsored repo models shows a distinct difference based on geographical location. Nancy Allen, assistant vice president, financing solutions business development at State Street, expressed her insights during the Securities Finance Technology Symposium in London.
Allen pointed out that while sponsored models in the repo market are well established in the US, the same cannot be said for Europe and the UK. She discussed that these models make up a substantial part of the market and are continuing to expand. The FICC platform has seen increased market uptake, with participation from unexpected players such as hedge funds.
Darren Crowther, general manager, Securities Finance and Collateral Management at Broadridge, added that his company has successfully onboarded approximately 13 clients for sponsored repo services in recent years. This trend is driven by the desire for collateral allocation and matching, as well as connecting to the FICC platform.
During a panel discussion entitled ‘Time for Change: The Future State of the Repo Markets – Where Do We Go From Here?’, Allen raised the question of how solutions and service providers can work together to improve interoperability within the market.
She also highlighted the growing interest in Peer-to-Peer (P2P) solutions as an alternative to traditional repo agreements. From a global standpoint, she emphasised the need for P2P solutions to function seamlessly across different currencies.
As industry players collaborate to provide joint solutions, Crowther believes that the P2P model represents the future of non-traditional securities finance trade types. He stated the need to build and enhance market interoperability to achieve this goal.
Reviewing the repo market, Richard Comotto, co-founder and chief product officer at London Reporting House, mentioned that there has been rapid growth since 2015. However, there are indications of a potential deceleration, particularly in Q3 2023, with the unwinding of targeted longer-term refinancing operations and a reduction in the ECB’s remuneration rate for non-monetary official deposits. Market participants are turning to the repo market as a preferred investment option.
In conclusion, the repo market has seen positive developments with the influx of new customers and cash. Nonetheless, there are questions about whether this growth is sustainable in the long term. The future of repo market trends is a topic that continues to intrigue industry experts and market participants alike.
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