APAC attains US$310.9 billion in outstanding repo value, says ICMA
05 December 2022 Asia-Pacific
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The Asia-Pacific non-Japan region has attained US$310.9 billion in the outstanding value of repo and reverse repos, a 19.5 per cent rise YoY. Average daily turnover has risen 48.3 per cent YoY to US$43 billion, according to the Asia-Pacific repo market survey conducted on 8 June 2022.
The report was conducted by the International Capital Market Association (ICMA) European Repo and Collateral Council (ERCC) and Asia Securities Industry and Financial Markets Association (ASIFMA).
The survey found a distinct change in the geographical nature of business, with a decline in cross-border business between APAC and Europe, relative to cross border business within APAC.
This theme was also reflected in major shifts away from transactions with counterparties in Europe, the US and major Asian markets in favour of “other APAC” and Australian counterparties.
Repo trades collateralised by European securities and US Treasuries lost ground in favour of Japanese securities and international bonds (eurobonds), ICMA reports. However, both US Treasuries remain a “significant source” of collateral. Overall, government securities became the largest class of collateral.
The paper highlights that the bulk of business in the non-Japan repo market share of reported repos was still executed directly between parties by telephone and electronic messaging. However, voice-brokers and, to a lesser extent, automatic electronic trading systems, increased their share over the period under review. Additionally, there was a rise in the share of repo trades cleared through a central counterparty.
In terms of currency, the US dollar remained dominant in the APAC (non-Japan) repo business. However, the percentage of repo trades used to raise funding in Japanese Yen rose over the period, largely at the expense of the euro, with AUD repo also remaining a significant component of overall repo activity for the region.
Philippe Dirckx, managing director and head of fixed income at ASIFMA, says: “The ASIFMA and ICMA survey shows the growing importance of repo across the region and the dynamics of its structure and stakeholders.
“It is encouraging to see the regulatory changes supporting its development aligned with our members’ expectations and requirements. There nevertheless remain impediments limiting cross-border repo to fully leverage the liquidity of the on-shore market.
“This is one of the key areas of focus when we engage with the relevant regulators and market infrastructures.”
The report was conducted by the International Capital Market Association (ICMA) European Repo and Collateral Council (ERCC) and Asia Securities Industry and Financial Markets Association (ASIFMA).
The survey found a distinct change in the geographical nature of business, with a decline in cross-border business between APAC and Europe, relative to cross border business within APAC.
This theme was also reflected in major shifts away from transactions with counterparties in Europe, the US and major Asian markets in favour of “other APAC” and Australian counterparties.
Repo trades collateralised by European securities and US Treasuries lost ground in favour of Japanese securities and international bonds (eurobonds), ICMA reports. However, both US Treasuries remain a “significant source” of collateral. Overall, government securities became the largest class of collateral.
The paper highlights that the bulk of business in the non-Japan repo market share of reported repos was still executed directly between parties by telephone and electronic messaging. However, voice-brokers and, to a lesser extent, automatic electronic trading systems, increased their share over the period under review. Additionally, there was a rise in the share of repo trades cleared through a central counterparty.
In terms of currency, the US dollar remained dominant in the APAC (non-Japan) repo business. However, the percentage of repo trades used to raise funding in Japanese Yen rose over the period, largely at the expense of the euro, with AUD repo also remaining a significant component of overall repo activity for the region.
Philippe Dirckx, managing director and head of fixed income at ASIFMA, says: “The ASIFMA and ICMA survey shows the growing importance of repo across the region and the dynamics of its structure and stakeholders.
“It is encouraging to see the regulatory changes supporting its development aligned with our members’ expectations and requirements. There nevertheless remain impediments limiting cross-border repo to fully leverage the liquidity of the on-shore market.
“This is one of the key areas of focus when we engage with the relevant regulators and market infrastructures.”
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