Finadium
March 2015

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Trade repositories in securities lending and repo are emerging as new tools for regulatory officials to monitor and assess risk within financial markets. Realistically, these trade repositories will not come into existence for some years to come still but the planning phase is actively underway. The time is now for market participants to get involved and ensure that the future end result will have at least neutral, if not positive, impacts for their business.

The purpose of a trade repository is to bring transparency by allowing regulators and other stakeholders to analyze an aggregation of market activity. This is helpful for risk analysis and trend spotting. A trade repository may seem like a simple data storage facility, but the underlying operational and regulatory framework that mandates its existence is what makes it unique.

Trade repositories currently exist for credit, interest rate, and equity derivatives; the experiences of OTC derivatives markets should educate and forewarn the securities lending and repo communities. As one example, a single trade repository alone works well with the data it captures, but multiple repositories each capturing their own data sets and expecting to harmonize transactions can turn one process into an exercise with uncertain success. The design and mechanisms for data collection are critical inputs to ensure that trade repositories work as initially hoped.

This Finadium report takes an in-depth look into what securities lending and repo trade repositories mean for market participants. We review the design of trade repositories for other markets and the regulatory initiatives focusing on securities lending and repo. We conclude with recommendations for improving the proposed design and challenges that market practitioners should seek to mitigate.

This report is 32 pages with 5 exhibits.

TABLE OF CONTENTS

■ Executive Summary

■ Why Trade Repositories Matter

■ Common Requirements
– Design Considerations
– The Experience of OTC Derivatives Trade Repositories

■ The Evolution of Regulatory Thinking
– The Financial Stability Board
– European Initiatives
– Gaining Momentum in the US

■ Improving on the Design
– Data Elements
– Operational Infrastructure

■ Five Challenges from Design to Execution

■ Appendix A: Financial Stability Board Proposed Data
Gathering on Repo and Securities Lending

■ About the Author

■ About Finadium

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