London, 13 December, 2012 – BrokerTec, ICAP’s global electronic fixed income trading platform, and MTS, a leading fixed income electronic trading venue in Europe that is majority-owned by London Stock Exchange Group, announces the launch of the RepoFunds Rate daily repo index for eurozone sovereign bonds.
RepoFunds Rate, the first index to reflect the effective cost of secured funding in key Eurozone countries, was developed in consultation with the repo community and dealers from major financial institutions, and will initially cover Germany, France and Italy.
RepoFunds Rate is based on centrally cleared, electronically executed one business day repo transactions rather than indicative quotes. These are based on a common settlement date and will include all Overnight, Tom-Next and Spot-Next trades in both General Collateral (GC) and filtered specifics in order to more accurately reflect the effective cost of Repo funding for trades executed on both BrokerTec and MTS.
Initially, all index data will be sourced from the BrokerTec and MTS electronic trading platforms, which together account for more than €250 billion of eurozone sovereign bond repos each day (single count). It will be distributed broadly via third parties, including Reuters (REPOFUNDS) and Bloomberg (REPF) as well as being available via e-mail and FTP sources.
The new indices, which will be published at the end of each business day, were developed in response to industry interest and demand, recognising the growing importance of secured funding and will offer dealers and investors confidence in benchmarking products and trades against the indices.
RepoFunds Rate data, including historical analysis, is publicly available on the new website at www.repofundsrate.com, which also launches today. Full details of the calculation methodology are available on the website.
Commenting on the launch of RepoFunds Rate, Bassma Elamir Riley, Head of Government Bond Repo, Deutsche Bank AG London, said: “RepoFunds Rate brings much needed transparency to the market. The inclusion of filtered specific transaction data, in addition to GC, sets the index apart from anything else currently available. The index will ultimately provide the trading community with a more efficient repo hedging tool, while simultaneously recognising the increasing role of collateral pricing in the OTC world.”
Romain Dumas, Managing Director of EMEA short term government products at Credit Suisse, said: “RepoFunds Rate should accurately reflect the cost of funding for the various types of collateral being used. As each trade will be centrally cleared, the counterparty dimension is removed to leave a purer measure of the secured interest rate, as essentially driven by the underlying collateral. Importantly, it will be broad based to provide a full, undisturbed measure of the market as it will incorporate both the trades labelled as GC and the transactions on specific bonds categorised as GC via an objective and transparent filtering process.”
David Garcia, Head of European Government Repo, J.P. Morgan, said: “The robustness of the RFR index lies in the large pool of executed transactions used in the calculation process. The fact that these transactions are cleared via a central counterparty extracts the credit component, making the underlying data comparable. It will provide investors with an accurate representation of actual funding levels, allowing them to use RFR swaps as a natural hedge for Repo holdings, shorter dated government bonds and eventually even longer dated assets.”
Oliver Clark, Money Market Product Manager at MTS, said “At a time when uncertainty is a defining element of the Eurozone sovereign bond world RepoFunds Rate delivers the high levels of transparency participants need to restore confidence in benchmarking and managing products referenced to the indices. These indices are built on significant volumes of real trade data executed by a diverse range of pan-European counterparties on electronic platforms and cleared – not traded bilaterally – and therefore are solid, reliable and robust. The fast time to market for the indices, from inception to launch, is testament to what can be achieved when the industry works together.”
John Edwards, Director of Fixed Income (EMEA), BrokerTec, said: “The launch of RepoFunds Rate marks an important milestone for the European repo markets. The transparent calculation of the index, whose methodology has been accepted by the dealers and the wider market, reflects the effective cost of funding in eurozone markets.
“This is a first step in making indices publicly available and we look forward to developing further products, such as derivatives, as RepoFunds Rate continues to gain traction.”