SWX Opens First Electronic Repo Market

On 18 June 1999, the SWX Swiss Exchange launched its newest product, Repo SWX, a totally electronic market for repurchase agreements. The culmination of more than one year of development efforts, this SWX platform has been designed to encompass a number of different markets, product types and currencies. Repo SWX will become an integral part of the future infrastructure for trading and clearing repo transactions on a national and international level. Repo SWX consists of three segments: the Swiss Repo Market, the International Repo Market and the Gilt Repo Market. In the Swiss Repo Market, 30 domestic banks began to execute their repo transactions on Repo SWX on 18 June 1999. The Swiss National Bank will play a core role in this revolutionary market. In the future, its daily open-market activities will be carried out electronically. Among the other participants are, of course, the "Big Two" Swiss banks, as well as various cantonal, private and commercial banks. Also, a number of smaller institutions will use this efficient and cost-effective mechanism to perform their refinancing operations via the repo market. In the coming weeks, additional banks will join in the dealings, among them Commerzbank and Dresdner Bank in Frankfurt, as well as Bank Austria in Vienna. The Swiss repo market is a "triparty" marketplace. All transactions concluded on Repo SWX will be automatically routed online and in real-time to SIS SegaInterSettle for clearing and settlement. In the International and Gilt Repo Markets, 7 London institutions, Barclays Capital, Credit Suisse First Boston, Helaba, J.P. Morgan, Nomura International, Paribas and UBS, will initiate repo trading in euros for German, French and Italian government securities, as well as in pounds for Gilt securities. Here, too, additional institutions will commence dealing operations by autumn, such as HypoVereinsbank, Munich, and Bank Austria in Vienna. A key topic at present in repo circles is the need to create netting capabilities and a central counterparty. By late summer of this year, Repo SWX will offer direct access to such services: repo contracts involving German government securities will then be able to be routed directly ("straight-through processing") to the London Clearing House for settlement in "RepoClear". In early 2000, a clearing and netting service will be available for German government securities and OAT's via the joint venture between Euroclear and GSCC (Government Securities Clearing Corporation). Repo SWX will continuously expand the acceptable collateral types and transaction currencies in step with the needs of market participants: in the near future, the palette is scheduled to be expanded to include government securities of other European countries, as well as corporate bonds and equity collateral. On the currency front, particular emphasis is being placed on expansion into the dollar and yen sectors. Repo SWX utilises both established and entirely new technologies, thus enabling interbank dealings to take place either via the Internet or leased telecommunications lines. All of this makes it possible for participants' up-front expenditures and admission costs to be kept close to the zero level. A participant merely pays a trading fee equivalent to an annualized 0.003% of the principal value of the transaction. The previously mentioned straight-through processing features of Repo SWX will enable market participants to handle much more efficiently an investment vehicle which, to date, has been extremely work-intensive in its clearing and settlement.