In a recent Linked In post, repo market expert Richard Comotto wrote that that one of the vital topics in the discussion in the UK and EU on T+1 settlement is the question of whether repo and securities lending, when negotiated and executed on a trading venue, should be subject to T+1. The repo market view, as set out by the International Capital Market Association (ICMA) is clear: repo should not be subject to the T+1 settlement deadline.
The reluctance of the European Commission and European Securities and Markets Authority (ESMA) to exempt all repos suggest that there is yet work on weighing a repo as a loan, not a conventional securities transaction.
“A Commission proposal to exempt only forward repo from the T+1 settlement deadline would solve the problem. But there is a tautology in that proposal. After the implementation of T+1 settlement, ‘forward’ would logically mean T+2 or later,” wrote Comotto.