14 March 2011

ICMA-ERC survey confirms long-term recovery in European repo market activity to pre-crisis levels

The European Repo Council of the International Capital Market Association (ICMA) released the results of its 20th semi-annual survey of the European repo market, undertaken in December 2010. The survey sets the baseline figure for market size at EUR 5,908 billion, representing a modest year-on-year increase of 6% on the figure of EUR 5,582 billion for the survey in December 2009.

The results of the latest survey confirm the continuing trend of modest recovery in the European repo market towards pre-crisis levels. The survey is based on returns received from 57 offices of 55 financial groups, mostly banks, including most of the largest European repo market participants. It is a snapshot of the size of the market in terms of the volume of outstanding transactions on a date in December; it does not include the value of repos undertaken by Central Banks as part of their intervention in the market, which would clearly have been important. 

The December survey showed a sharp rise in the volume of electronic repo trading to 28.3% of the survey volume from 22.5% in the June 2010 survey. Amongst other things this figure has been boosted by the revival in the repo market in Spain, as banks there regained access to money market funding by turning to new local Central Counterparty Clearing (CCP) services introduced in the second half of 2010 by MEFF and LCH.Clearnet.

The Chairman of the ICMA's European Repo Council, Godfried de Vidts, said: “The survey again demonstrates the increasing importance of CCPs in the repo market and also that significant volumes of repo-cleared trades are now registered with CCPs after the trade has been completed directly between two parties or via a voice broker, not just via electronic trading systems. As the increased use of market infrastructures, such as CCPs, are part of the overall transformation to a less systemically risky market environment, regulation should encourage their use by allowing users access by their preferred method. The recovery in the share of Spanish government bonds as repo collateral is a clear indication that banks recognise the importance of centralised clearing infrastructures.”

© ICMA