Repo in an Agency Clearing and Done Away World
Finadium
February 2025
The Fixed Income Clearing Corporation’s (FICC’s) Agent Clearing Model for repo, and done with and done away options, creates opportunities but also challenges for dealers and clients. Costs have been slow to come into focus, and a move away from the relationship-driven nature of repo towards a more commoditized product brings new questions to the market.
This report examines the cost implications of Sponsored, Agented, done with and done away in US repo markets. It provides an overview of the models approved for use at FICC and delivers results of a primary survey conducted in Summer 2024 across 37 buy-side institutions on their opinions of repo clearing and the agent model. Lastly, it consolidates market commentary told to Finadium individually and at our Rates & Repo North America 2024 conference on model options.
The more that clients understand what the model options mean as dealers present their product offerings, the better they can assess the short-, medium- and longer-term impacts on their businesses. Our survey of hedge funds and cash investors shows that while clients are generally familiar with the US Treasury repo clearing mandate, the application of agent clearing and done away models could mean additional costs. Some firms reject posting margin in an agent model altogether although this may be difficult to avoid; other clients and dealers think that the Agent model will be necessary to accommodate market demand for cleared services.
This report should be read by any market participant in the repo or government bond trading space as a preview on client economics that many firms will discuss over the next year.
Table of Contents
- Executive Summary
- From Relationship to Commodity?
- A Summary of Repo Clearing Models
- What the Buy-side Thinks: Survey Results
- Hedge Fund Market Sizing for the Agent Model
- The Cost of Doing Business
- About Finadium LLC