Finadium
April 2014

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The purpose of this report is to take the sum total of financial market infrastructure changes and provide a roadmap for the repo and securities lending markets to not only survive but also to expand in this new environment. We approach the post-reform market from the point of view of regulatory changes but also incorporate new products, technology and additional participants. The end result is a holistic model for the market’s continued expansion.

The repo and securities lending markets have operated in a state of uncertainty for the past 5 1/2 years. Central to regulators’ narrative on the causes of the crisis have been the level of leverage dealers and hedge funds employed, their over-reliance on overnight financing and the quality of the assets they held. All of this put repo and its close relation, securities lending, firmly in the cross hairs of US and European regulators.

Initially, the sheer volume of regulatory change from numerous regulators often operating independently of one another threatened to shrink the secured finance markets to a point where it would struggle to perform its traditional functions within the broader capital markets. Repo and securities lending are not the most glamorous markets, nor are they particularly well understood. But, they are vital cogs in the global securities market.

This report should be read by repo dealers, securities lending professionals, beneficial owners, cash investors, policy makers, fixed income investors and others with a vested interest in a safe and robust global repo and securities lending market.

This report is 27 pages with 2 exhibits.

TABLE OF CONTENTS

■ Executive Summary

■ Function Over Form
– Key Constraints

■ Proposed Solutions
– Central Counterparty Clearing
– New Products
– Right-Sizing with Technology

■ The Big Unresolved Issues

■ The Post-Reform Repo and Securities Finance Model

■ About the Authors

■ About Finadium

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