In this report, Finadium delivers the results of conversations with over a dozen market participants using electronic repo trading platforms. We heard from these firms what’s working and what isn’t, how important they see electronic repo trading by counterparty type, and how many platforms the market really needs. We also provide market sizing and competitive differentiation based on a combination of publicly available data and commentary from users.
The European repo market has been engaged with talk of automation and electronic trading. From new product entrants to opportunities for improving post-trades processing, market participants are assessing different trading platforms and working to integrate them into operations and workflows. For some firms, electronic repo is an opportunity to develop central limit order books and impose greater automation throughout the trading process. For others, it means a platform to input transactional details of processing trades electronically after decisions are made on phone calls or electronic messaging. There is no one right answer for every firm either for every transaction type.
While much of the driver for platform adoption is driven by the Securities Financing Transactions Regulation (SFTR) going live for investment firms and credit institutions in July 2020, electronic trading offers opportunities to streamline operations, reduce manual engagement, improve liquidity management and ultimately figure out how to use all the data generated to automate more portions of repo and liquidity management.
Users and market operators alike expect that the next several years will see continued development and important advances in electronic repo trading. These may range from data integration of repo platforms to other parts of the firm, to greater use of central limit order books, to increasing the use of dealer to client platforms. The biggest point of conversation however was on relationships: for all the new technology, how market participants manage their relationships will be the most important driving force of European repo in the next few years.
This report should be read by any participant in European repo trading, whether electronic or not, across dealers and clients. It may also be useful to regulators and technology firms looking to provide additional oversight or services.
A direct link to the report for Finadium research clients is https://finadium.com/finadium-report-desc/the-user-experience-of-electronic-repo-trading-in-europe/
For non-subscribers, more information is available here.