New data from S&P Global Market Intelligence show that price differences between repo and securities lending single name ISINs continue to be found across multiple geographies. These gaps are supposed to be eliminated by traders able to capitalize on returns and squeeze out returns, but that isn’t happening in the financing markets. Why are discrepancies persisting over time and could central clearing change the pattern?
In a 2024 article, we looked at S&P’s data on repo and securities lending rates when compared side by side, and found evidence of repo to securities lending spreads over 15% for some securities. In a later webinar we looked at capturing cross-collateral pricing opportunities using technology. Our conclusion across these investigations is that the data and tools are there to generate returns on rate differences between similar products.
In this article we revisit S&P’s repo and securities lending data to validate where spreads are now. We then ask, are conditions changing such that more repo data are needed to counter the potential impacts of cleared repo or, conversely, less data if the market is becoming more transparent? And how does this data matter for traders in bilateral markets if they are not able to take advantage of wide spreads now due to legal or operational issues, as appears to be the case?
Thames Water then, B. Riley Financial now
In our Fall 2024 review of S&P’s repo and securities lending data, we found over 60 ISINs for which the spread difference between the securities lending benchmark fee and the repo rate for the same security varied by at least 133 bps, with a high point at 1,539 bps. Evidence is available across Europe, Middle East and Africa (EMEA), North America and Asia securities. There is a similar level of rate dispersion between single name ISIN repo and securities loans in spring 2025. However, some differences in security characteristics have emerged that warrant attention.
Our 2024 analysis featured names like Thames Water and Bausch, both of which had 100% utilization in the securities lending market. This suggested that the ability to profit from rate differences would be as limited as supply: you can’t capture a spread if you can’t repo in a security to begin with, then lend it out to a securities borrower. Sometimes the limits are imposed by regulation or internal policy, as in the case of funds with caps on how much of a security or portfolio they will lend. These caps may not apply to both repo and securities lending equally.
This time, we see multiple securities with wide spreads, including one larger than Thames Water. In the Americas, B Riley Financial has a repo fee of 4,678 bps (46.78%) vs. a securities lending fee of 2,878 bps (28.78%), for a net spread of 1,800 bps (18%) (see Exhibit 1). Wolverine Escrow LLC has a large opportunity in the opposite direction: the securities lending fee is 2,685 bps (26.85%) while the repo rate is 1,491 bps (14.91%), for a spread of 1,374 bps (13.74%).
Both of these Americas securities in Q1 2025 have enough available inventory in the securities lending market to enable a trade to gather momentum: B Riley has barely 1% on loan while Wolverine has 46%. Based on supply and demand pricing, we could expect that these securities would not turn special in the lending market until utilization were higher, but there may again be external caps on what beneficial owners will lend or which borrowers have access to inventory at the right times. These bottlenecks continue to create opportunities for revenue capture by well-placed intermediaries.
Will central clearing change the current landscape?
Expected mandatory clearing of US Treasury repo and the growth of non-mandatory government repo clearing suggests a more standardized marketplace in the future. The global trend is driven by operational effieciencies and dealer balance sheet savings: in every geography, dealers report that moving from unsecured financing to bilateral repo, then bilateral repo to cleared repo, offers direct opportunities for financial resource optimization. Dealers at institutions that are not balance sheet constrained see the possibilities in front of them as much as anyone else; the savings incentives are big enough to move forward even after the cost of posting margin to a central counterparty (CCP).
Interest in cleared repo is evident worldwide, and the fact that the US is pressing forward with repo clearing across political changes has focused attention in other regions. Although US rules have been delayed until June 2027, this has not stopped volumes on the DTCC’s Fixed Income Clearing Corporation from continuing to grow, reaching over US$2 trillion at the end of March 2025. In Europe, reports from major clearinghouses are that buy-side clients are onboarding in 2025 and more are expected in 2026; a leading European dealer told us recently that cleared repo could not arrive soon enough to help with balance sheet relief. In Asia and Latin America, a large technology provider says that clearinghouses are calling to ask about the viability of sponsored and other types of repo clearing programs. In 2025, repo clearing is truly a global phenomenon.
Will repo data still be necessary in an increasingly cleared environment? While much will depend on the depth and breadth of products cleared, the initial answer is yes. Cleared repo means that the counterparty changes but the trade mechanisms stay the same. A trade may be executed verbally then submitted for clearing, or executed on an electronic trading platform then sent down for straight-through processing. In all cases, repo remains (for now) an RFQ market, and counterparties are checking quotes for a range of single ISIN and general collateral transactions throughout the day. Access to data from multiple bids or a central source is a critical differentiator to ensuring that counterparty pricing is accurate.
Matt Chessum, Director of Securities Finance, ETF and Benchmarking Services at S&P Global Market Intelligence, noted that “With the growing complexity of the repo market, the integrity and accessibility of data in cleared and uncleared transactions will empower participants to make informed decisions, fostering greater confidence and stability in the financial system.”
Even when firms do not have access to both repo and securities lending markets themselves, knowing that spreads exist can help with pricing. If a client knows that an intermediary can capture an 18% return by borrowing a security, then pricing up by a percent or two would be fair play. Not having this information exposes the client to potentially losing out on what may be a key revenue opportunity.
At the same time, for all the growth in clearing, many of the price differences identified in the S&P Global Market Intelligence dataset are for non-government bond securities. The majority of this market is bilateral and there is no reason to think that this will change any time soon.
The impact from central clearing of repo on data requirements will be limited. Repo remains a bifurcated market with individual clients receiving pricing based on relationship and importance. Likewise, securities loan pricing continues to be negotiated based on term, collateral, counterparty and rate. These are not one-size-fits-all markets: central clearing, while driving standardization for operations and perhaps general collateral, will not change the pricing of financing market structure. A reliable source of data for specials across financing marketplaces creates the best opportunity to help ensure optimal pricing on either side of the trade.
This article was sponsored by S&P Market Intelligence.