2023 was a year of transformation in the world of finance, triggered primarily by a paradigm shift in monetary policy. This led to a substantial overall growth of 70% in Eurex’s repo markets. A report by Eurex Repo’s members of the Management Board, Matthias Graulich, and Frank Gast, summarizes the key drivers behind this development, what factors and events impacted the repo business in 2023 and what this upcoming year will have in store for us.
Substantial growth in repo markets at Eurex
Rising interest rates, TLTRO (targeted longer-term refinancing operations) repayments, and further reductions of excess liquidity from quantitative tightening have contributed to this significant increase in trading activities and record volumes at Eurex’s cleared repo markets. The Single ISIN and General Collateral (GC) segments increased by 38%. GC Pooling. Eurex’s dedicated cash repo funding market, even saw a growth rate of more than 140%. Average daily outstanding volumes across all markets have grown by 63%, resulting in a new record of total cleared volume of €920 billion in September 2023.
Changing monetary policies and regulatory landscapes
The report describes how the paradigm shift in monetary policies of central banks effected liquidity and contributed to a revitalization of the repo cash funding markets. Several regulatory factors such as Basel 3, EMIR 3.0 or the mandate set out by the US Securities and Exchange Commission (SEC) to centrally clear transactions in the US Treasury cash and repo market have an additional impact on the repo market.
Increasing demand for cleared repo
As a result, centrally cleared repo solutions are clearly on the rise. This is reflected not only in the volumes but also in the number and structure of participants. An increasing number of buyside firms are entering the cleared repo markets and are attracted by the various access models of Eurex to become a CCP member.
The full report outlines all the benefits of central clearing and why especially the dealer-to-client repo segment is affected, as well as how Green Bonds and EU Bonds are gaining importance within Eurex Repo markets. And finally, do not miss the outlook on 2024.