Euro repo market in December down YoY, ICMA survey shows
24 March 2021 UK
Image: stock.adobe.com/monsitj
The European repo market stood at €8.3 trillion in December 2020, according to the International Capital Market Association’s (ICMA) latest survey, down from the year before, reflecting both new and old post-COVID market conditions.
ICMA’s European Repo and Collateral Council (ERCC) survey — the 40th semi-annual survey of the European repo market — calculated outstanding repo business as of 9 December 2020 from the returns of 60 financial institutions.
While the European market bounced back from June 2020’s figure of €7.9 trillion, it narrowly failed to reach the record high of €8.3 trillion set in December 2019.
For the first time the survey features detailed analysis of the Securities Financing Transactions Regulation (SFTR) data published by trade repositories and collated by ICMA, with first reporting beginning in July 2020.
The trade body says the survey is a “snapshot of the market at the end of an unusual year” with the pandemic in full swing and the UK about to embark on it’s post-EU membership journey.
Key market trends seem to be reverting to the pre-pandemic norm, the survey shows, with triparty repo activity, formerly benefitting from the COVID induced “dash for cash”, returning to an 8.8 per cent share of the sample in the second half of the year as central bank funding became available in response to the ongoing pandemic.
Similarly, the share of electronic trading on automatic trading systems (ATS) such as BrokerTec, MTS and Eurex fell back from the all-time highs measured in June’s survey.
However, several changes have persisted, ICMA notes, including the arrest of the 20-year-long decline of the use of voice-brokers. In periods of market stress, ICMA says, voice-brokers can offer their clients much-needed support in difficult market conditions.
An additional long-term trend that has faced headwinds from an unusual year is the sharp recovery in the share of core eurozone government securities used as collateral, ICMA adds. This is a result of increased issuance and continuing strong demand for high-quality assets.
At the same time, the share of peripheral eurozone securities has declined as European Central Bank facilities reduced the need of smaller regional banks to refinance themselves in the market.
ICMA CEO Martin Scheck says: “The data from the ICMA survey over the last 20 years is a rich source for analysis of development in the European repo market, current trends and changing business models. The 40th survey adds to this with data on the response of the market to the challenges of the past year.
“The successful introduction of SFTR reporting gives us a new source of market data, but the depth of information and commentary provided by market participants themselves through the survey provides additional insight,” Scheck adds.
ICMA’s European Repo and Collateral Council (ERCC) survey — the 40th semi-annual survey of the European repo market — calculated outstanding repo business as of 9 December 2020 from the returns of 60 financial institutions.
While the European market bounced back from June 2020’s figure of €7.9 trillion, it narrowly failed to reach the record high of €8.3 trillion set in December 2019.
For the first time the survey features detailed analysis of the Securities Financing Transactions Regulation (SFTR) data published by trade repositories and collated by ICMA, with first reporting beginning in July 2020.
The trade body says the survey is a “snapshot of the market at the end of an unusual year” with the pandemic in full swing and the UK about to embark on it’s post-EU membership journey.
Key market trends seem to be reverting to the pre-pandemic norm, the survey shows, with triparty repo activity, formerly benefitting from the COVID induced “dash for cash”, returning to an 8.8 per cent share of the sample in the second half of the year as central bank funding became available in response to the ongoing pandemic.
Similarly, the share of electronic trading on automatic trading systems (ATS) such as BrokerTec, MTS and Eurex fell back from the all-time highs measured in June’s survey.
However, several changes have persisted, ICMA notes, including the arrest of the 20-year-long decline of the use of voice-brokers. In periods of market stress, ICMA says, voice-brokers can offer their clients much-needed support in difficult market conditions.
An additional long-term trend that has faced headwinds from an unusual year is the sharp recovery in the share of core eurozone government securities used as collateral, ICMA adds. This is a result of increased issuance and continuing strong demand for high-quality assets.
At the same time, the share of peripheral eurozone securities has declined as European Central Bank facilities reduced the need of smaller regional banks to refinance themselves in the market.
ICMA CEO Martin Scheck says: “The data from the ICMA survey over the last 20 years is a rich source for analysis of development in the European repo market, current trends and changing business models. The 40th survey adds to this with data on the response of the market to the challenges of the past year.
“The successful introduction of SFTR reporting gives us a new source of market data, but the depth of information and commentary provided by market participants themselves through the survey provides additional insight,” Scheck adds.
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