The International Capital Market Association (ICMA) has today published a study entitled ‘The European Credit Repo Market: The cornerstone of corporate bond market liquidity’ which explores and describes the state and evolution of the European corporate bond repo and securities lending market (the ‘credit repo market’).
This study builds on ICMA’s previous work with respect to both corporate bond market and repo market evolution and liquidity, and investigates the European credit repo market from the perspective of its role, structure, participants, dynamics, external impacts, challenges, opportunities, and potential evolution, particularly to the extent that this plays a pivotal role in overall corporate bond market liquidity.
Among the findings of the study:
The study concludes that while ongoing and future challenges to supply and intermediation will ultimately determine the credit repo market’s ability to play its pivotal role in supporting corporate bond market liquidity, there would seem to be scope for creating efficiencies through automating many of the highly manual and labour-intensive processes of the market. However, automating the credit repo market is not straightforward, given the intricacies and nuances of the market, with the market becoming even more complex and fragmented with every new layer of regulation.
The study is a joint initiative of the ICMA European Repo and Collateral Committee (ERCC) and the ICMA Secondary Market Practices Committee (SMPC).