The Realities of Repo Clearing for the Buy-side
Finadium
June 2015
The introduction of repo clearing for the buy-side without a clearing intermediary is an important change in financial markets, but one that comes with some risk. Buy-side firms will soon be asked to participate in repo CCPs as a way for dealers to improve their capital position and benefit from an increased number of potentially nettable transactions. Buy-side firms may or may not see improved pricing, depending on who they transact with, but should see more stable supply than in todayʼs bilateral markets.
Cash investors interested in CCPs should take the time to understand what they are getting into. The risk management policies of CCPs are different than bilateral transactions; some requirements on liquidations could create a liquidity squeeze and require alternate funding sources, and each CCP will be slightly different in their operations and practices. Buy-side firms must also consider their trading and counterparty options when using a CCP vs. conducting a bilateral transaction.
This report provides a realistic evaluation of what repo clearing offers the buy-side, who is participating and how pricing may be impacted. This report is part of the Finadium Executive Briefing series, providing briefings and analysis to the financial markets industry.
This report is 18 pages with 7 exhibits.
TABLE OF CONTENTS
■ Executive Summary
■ The Importance of Letting the Buy-side in to Repo Clearing
– Repo Clearing in Market Perspective
■ Current and Proposed Offerings
– The Players
■ Pricing Implications
– Next Steps for Buy-side Firms
■ About the Author
■ About Finadium