The International Capital Market Association (ICMA) today released the results of its 12th semi-annual survey of the European repo market. The survey, which is effectively a snapshot of the volume of repo trades outstanding on December 13, 2006, shows market size at over EUR 6,430 billion (EUR 6.4 trillion), an annual increase of 14% over 2006, compared with an increase of 18% in 2005.
The total value of repo contracts outstanding on the books of the 74 institutions who participated in the latest survey rose to EUR 6,430 billion compared to EUR 6,019 billion in June 2006 (based on 79 survey responses) and EUR 5,883 billion in December 2005. The growth in the market in the last 6 months of 2006 reflects healthy activity in the underlying European debt securities market over this period.
The survey also indicates a renewed boom in electronic trading of repo which now accounts for 23.3% of trading. Most significantly, the share of anonymous trading on electronic systems rose from just 8.7% of the total business to over 14% in December. By comparison the market share of voice broking continued to contract falling to a new low of 19.8%.
The strong growth of triparty repo shown in previous surveys faltered slightly with market share falling from 11.3% in June to 10.6% in December although the outstanding business reported directly by the triparty agents actually increased, suggesting a broadening of triparty activity beyond the core interdealer market represented in the survey. It is likely that growth in triparty repo will continue in the coming months as re-use of collateral in triparty arrangements is facilitated by the introduction of Euro General Collateral settlement by Central Counterparties during the course of this year.
Commenting on the survey results, Godfried De Vidts, Chairman of ICMA’s European Repo Council said: “Growth in the repo market continues and although the sample of banks covered by this survey has gone down it is clear that there is a strong upward trend in outstanding volume. Repo is becoming a commoditised business hence the growth of electronic trading and in particular growth in anonymous trading volumes through a central counterparty. The continuous drive by the EU Commission through various initiatives to make clearing and settlement more efficient and ongoing ECB discussions regarding Target 2 Securities should mean that clearing and settlement of this high volume business will become cheaper. As chairman of the European Repo Council I appeal to all banks active in this market to participate in the survey as it is an essential tool for development in this market”.
The results of the repo survey were presented today at the General Meeting of the European Repo Council, a forum affiliated to ICMA, where the repo dealer community meets to discuss the practical challenges of this rapidly evolving marketplace.
