Market Insights on Electronic Repo Trading

Finadium
December 2024

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The electronic repo markets have seen a global surge of interest over the last two years, driven in large part by dealer to client (D2C) trading including Sponsored Repo at the US Fixed Income Clearing Corporation (FICC). US mandatory clearing regulation is just one factor of many moving the markets forward however. In Europe, streamlining workflows and managing post-trade regulatory reporting is a key requirement. In Asia, although adoption is moving more slowly, large clients are seeing the benefit of eliminating manual tasks in favor of focusing on relationship building.

Over the last year, Finadium has had numerous conversations and run multiple conference panels and consulting assignments in the electronic repo trading space. This report summarizes our main findings of what is happening, who is benefitting and where the market is heading. An important topic is intraday funding, an area where dealers have opportunities to reduce their costs primarily by using distributed ledger technology (DLT) systems and the larger vendors see an opportunity whether on or off chain.

Electronic repo trading growth is a global phenomenon; what happens in Europe impacts the US while the US mandatory repo clearing rules have wide cross-border impacts. As a result, firms trading repo in both their home countries and internationally are either connected to an electronic trading platform or will soon need to evaluate the major vendors to go live. There are too many regulatory and post-trade requirements for market participants to manage otherwise.

This report is an evaluation of the drivers of global electronic repo trading today. While there is no question that volumes are up and set to further increase, how dealers and clients interact with these platforms and what the benefits are to their business models, aside from a reduction in trading tickets, should be understood as the repo market landscape continues to evolve. The report should be read by repo dealers and clients, technologists, data strategists, regulatory analysts and other providers of key services to the repo market.

Table of Contents

• Executive Summary
• A Global Growth Market
• Market Sizing and Trading Behavior
  • – Data as a Business Driver
  • – The Client Experience
• The Intraday DLT Opportunity
  • – The Connection to Central Bank Reserves
• The Global Impact of US Mandatory Repo Clearing
  • – The Great Convergence
• About Finadium LLC