We think BNYM has 78% of the US tri-party repo market; JPM has 22%

We were asked last week what the market share was between the two big US tri-party repo agents, BNYM and JPM. We dug into the numbers and think that the right split is 78/22 in BNYM’s favor. We present the rationale below along with a possible scenario that could push the numbers a bit in JPM’s favor.

To start, the Fed tells us that the value of tri-party repo data held on August 9, 2012 was $1,782.55 billion (or $1.78 trillion).

BNYM’s marketing literature says that it holds $1.8 trillion globally in tri-party repo collateral. This number has held constant for a while but we think there is little overall change from the last couple of years.

The next trick is figuring out what share of that $1.8 trillion is in US assets. The Global Custodian survey from March 2012 suggests that BNYM has $280.1 billion in European tri-party repo assets. While the figure doesn’t account for market share changes between 2008 and 2012, we think it is probably a fair number to work from. We are now left with $1.52 trillion in BNYM assets to figure out a domicile for.

Based on our research, we think that BNYM’s non-US, non-Europe business in places like Brazil and Australia is in the $130 billion range. This is a best efforts guess and the real number could be up to $220 billion (more on this in a moment), but we thought that $130 billion was closer to the right figure.

This leaves us with $1.39 trillion in BNYM’s US tri-party repo collateral, which is 78% of the Fed’s total figure for August.

A scenario that tips market share towards JPM is if we underestimated the amount of BNYM’s non-US, non-Europe tri-party assets. Let’s say the actual figure is $220 billion. In that case, BNYM’s US tri-party holdings would be an even $1.3 trillion and its market share would be 73%.

We note that in marketing material published earlier this year, BNYM did indeed say that its US tri-party collateral held was $1.3 trillion. However, in January 2012 the US tri-party repo market was at $1,666.24 billion, according to the Fed, which is some $124 billion less than it is today. Tacking on 78% of the difference puts another $90.5 billion in BNYM’s assets for August.

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