Repo market is large and stable, says ICMA
11 October 2019 London
Image: Shutterstock
The repo market is large and stable and still presents counterparty credit risk reduction, yield enhancement and funding resilience, according to Michel Semaan, board and chair of the International Capital Market Association (ICMA) European Repo and Collateral Council (ERCC) and committee.
Semaan, also global head of secured funding and G10 non-euro rates at Crédit Agricole Corporate and Investment Bank, made the comment in ICMA’s Q3 report.
Semaan referenced the ICMA ERCC biannual survey which indicates that the secured funding market is a growth area for both buy and sell-side financial actors.
Collateral
Semaan said: “The various regulatory requirements have made that need more acute: first and foremost, we all need to optimise our collateral management by having the right collateral in the right place at the right time and in the right quality and quantity. We all need to comply with a plethora of liquidity and leverage ratios.”
Collateral Management Harmonisation Task Force is also setting up expert groups to assess bilateral collateral management, including operational frictions and the need for improving the collateral mobility, triparty collateral management, in particular, questions related to the development of a single triparty model, asset servicing and taxation processes.
Regulations
Speaking of the April 2020 Securities Financing Transactions Regulation (SFTR) deadline, Semaan commented: “The ICMA ERCC is working on detailed best practice documents to supplement the guidance provided by ESMA, but it remains a challenging task.”
Martin Scheck, chief executive of ICMA, further indicated that the association is now running seminars and workshops to educate market participants on how they will need to comply with SFTR. He stated: “Whilst this is an EU regulation, it has an extraterritorial impact.”
US repo
Andy Hill, senior director at ICMA, touched on US repo rates and how they unexpectedly spiked 750 basis points, printing at a high of 10 percent in September 2019.
He added: “Volatility in repo rates is not in itself a reason for alarm. Repo rates, like any asset price, are a function of demand and supply and are generally not static in healthy, functioning markets. Rather it was the size of the move that drew attention.”
Semaan, also global head of secured funding and G10 non-euro rates at Crédit Agricole Corporate and Investment Bank, made the comment in ICMA’s Q3 report.
Semaan referenced the ICMA ERCC biannual survey which indicates that the secured funding market is a growth area for both buy and sell-side financial actors.
Collateral
Semaan said: “The various regulatory requirements have made that need more acute: first and foremost, we all need to optimise our collateral management by having the right collateral in the right place at the right time and in the right quality and quantity. We all need to comply with a plethora of liquidity and leverage ratios.”
Collateral Management Harmonisation Task Force is also setting up expert groups to assess bilateral collateral management, including operational frictions and the need for improving the collateral mobility, triparty collateral management, in particular, questions related to the development of a single triparty model, asset servicing and taxation processes.
Regulations
Speaking of the April 2020 Securities Financing Transactions Regulation (SFTR) deadline, Semaan commented: “The ICMA ERCC is working on detailed best practice documents to supplement the guidance provided by ESMA, but it remains a challenging task.”
Martin Scheck, chief executive of ICMA, further indicated that the association is now running seminars and workshops to educate market participants on how they will need to comply with SFTR. He stated: “Whilst this is an EU regulation, it has an extraterritorial impact.”
US repo
Andy Hill, senior director at ICMA, touched on US repo rates and how they unexpectedly spiked 750 basis points, printing at a high of 10 percent in September 2019.
He added: “Volatility in repo rates is not in itself a reason for alarm. Repo rates, like any asset price, are a function of demand and supply and are generally not static in healthy, functioning markets. Rather it was the size of the move that drew attention.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
