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Godfried De Vidts, Chairman of the ICMA European Repo Council said: “The stability of the headline figure over the last few surveys does not tell the full story. Increased bond issuance, extraordinary excess liquidity from LTROs and QE and increasing demand for collateral driven by regulation might reasonably have been expected to produce an increase in repo trading, however the secured financing business is already facing significant pressure as the implementation of regulatory initiatives such as the Leverage Ratio, Net Stable Funding Ratio, Central Securities Depositories Regulation and Bank Recovery and Resolution Directive begin to bite. A further qualitative study on repo in Europe, to be released next month, will give us greater insight into the profound changes underlying these aggregated figures.”
A further increase in the share of directly-negotiated transactions, which have been increasing since 2012. This is presumed to reflect a regulatory-driven shift away from low-margin interbank and commoditized transactions, much of which are electronically traded, towards customer and customized business, most of which is directly negotiated.
Domestic repo continued its long term decline, probably reflecting the restructuring of the European repo business in the face of regulatory and other challenges.