Finadium: Repo at the Digital Crossroads

This Finadium report captures the progress of how the repo industry is digitizing with a focus on Distributed Ledger Technology (DLT). The transition of repo from analog to digital, and the potentially broader adoption of DLT platforms, has already streamlined a range of market practices. A next phase may represent not just a technology change but also a re-ordering of business processes across the industry.

In the pursuit of efficiency and lowered risk, repo is a good candidate for the further application of digitization, which may also be conflated with electronification and the application of DLT (frequently referred to as blockchain). Repo remains frustrated by a high degree of manual post-trade processing. Indeed, as one panelist at the recent Finadium Rates and Repo 2021 conference put it, “Repo is made for blockchain and digitization, it is screaming out for it!” But this basic statement hides a number of complications, including: what would DLT digitization achieve, how would it work, who would deliver it, and everyone’s favorite question of: who will pay for it?

Digitization through DLT is not the only choice: firms have been investing in electronic trading and Straight-through Processing (STP) solutions that solve overlapping challenges. An inherent tension has developed between DLT and STP using existing technologies: the more firms have invested in STP, the more this may impede their interest in adopting DLT now or later on.

This report is the conclusion of six months of projects and interviews on the digitization of repo with a focus on DLT. It incorporates a broad number of discussions with repo dealers, vendors, triparty agents, CCPs and regulators on what repo digitization means, how to get there and what happens next. It also captures participant thinking at two recent Finadium events, Rates & Repo 2021 and a September 2021 webinar on blockchain collateral platforms. This report documents industry views on leadership, requirements for getting to digitization and what future scenarios may look like.

This report should be read by all market participants with an interest in repo and secured financing more broadly. Dealers will learn how their peers view the speed and value of digitization and DLT, while vendors can identify competitive opportunities and threats to their existing models. Regulators will see opportunities for refining their proposals on digital marketplaces to support private sector development with oversight and analytics capabilities.

A direct link for Finadium subscribers to this report is

For non-subscribers, more information is available here.

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