In our report on institutional investors in the repo market released yesterday we sized global repo volumes outstanding at US$13.78 trillion. We reviewed other estimates for this report and recognize that different estimates vary widely. Below we present our methodology, sources and how we arrived at our figure.
To start, we intended to count only one side of repo market transactions for both bilateral and tri-party transactions. Some studies including the ICMA record all the repo and reverse repo transactions on the books of study participants. This is an excellent methodology and should not be discounted; our intention however was to get down to one side of the transaction.
In the US, the easiest data to find are for US tri-party and the DTCC’s GCF. The data are available here and are generally kept updated. As of December 2012, the US tri-party market stood at US$1.95 trillion, an increase of US$300 billion from earlier in 2012. The FICC-cleared US General Collateral Finance market was another US$1.09 trillion.
In June 2012 the Federal Reserve took a shot at estimating the size of the US bilateral repo market. It came up with a figure of US$964 billion at that time. Given increases in the US tri-party repo market during that time, and based on our survey data, we felt confident in increasing that figure to a round US$1 trillion. The greatest value of this paper was to eliminate double counting and reduce the previous estimate of US$10 trillion (Gorton and Metrick 2010) to more digestible figure. The Fed’s blog post is here. Our review of this post is here.
The European data are tougher to sort through, not because of the ICMA’s excellent survey work, but because of the double counting question. In Europe, the June 2012 the ICMA European repo survey found €5.647 trillion in transactions, or US$7.34 trillion, including both bilateral and tri-party. We recognize that this figure most likely includes some double counting as it assesses all the repo and reverse repo transactions on the books of respondents; however, there is no way to know what portion of transactions are truly double counted and/or which transactions are conducted with counterparties outside of the ICMA survey. We considered this matter and decided to accept the ICMA figure at its current value. An exact identification of double counting however could reduce the ICMA’s figure by 0%-50%.
In Asia, we benefitted from work conducted by the Hong Kong Monetary Authority, which sized repo relative to GDP in Asia at 8% and Asia ex-Japan at 1.8%. From there it was easy to get World Bank/IMF data on national GDPs. This gave us a figure of US$1.8 trillion for Asian repo market volumes. By coincidence, we noted an article in Risk Magazine last week that talked further about the Asian repo markets and used the same data citation. While we didn’t necessarily agree with their conclusion, that is an article for another day.
For the rest of the world we relied on anecdotes, individual data citations and our own market knowledge. In Canada for example, a citation on RBC Capital Markets’ website said that the outstanding volume of repo in Canadian markets was up to CA$100 billion.