The European Repo Market

by Axel Pierron, June 6, 2007

Abstract

Paris, France 6 June 2007

European Repo Market

has experienced a constant growth across over the past five years, from €1.9 billion in 2001 to €6.4 trillion by the end of 2006. will continue to grow significantly due to Basel II, according to a new report from Celent, . Continued growth will generate significant opportunities for financial institutions, e-trading platforms, and order matching systems providers.

But while gets a lot of attention for impressive volumes Celent found the story is different when the number of daily transactions is analysed. According to the report, just over 25,000 trades are executed each day. The limited number of transactions demonstrates that this market operates with a restricted number of active participants that execute large transactions. But the repo market could draw new participants, from asset managers looking for secure investment vehicles to large corporates seeking more efficient financing tools.

"There are some major discrepancies between the means of trading in terms of average transaction value," says Axel Pierron, analyst at Celent and author of the report. While the average value of transactions through the OTC market and voice brokerage is estimated at around €165 million for an average total daily value of €1.4 trillion, it is only estimated at around €30 million on electronic platforms for an overall daily value of €370 billion.

E-trading has yet to dominate with e-trading platforms accounting for 49% of the transactions, while OTC and voice brokerage transactions represent 51%.

"This raises questions about the business model of electronic platforms in ," adds Pierron. "My bet is that e-trading platforms are expecting to benefit from the entrance of new market participants."

Other key findings of the report include:

  • The likeliness to see the development of a dealer-to-client electronic market for European repos.
  • The OTC market is and will remain quite significant in European repos.
  • As the number of market participants increases, Celent expects regulators to step in.
  • The market is dominated by money market instruments.
  • Trading in European repos is highly concentrated.
  • Repos are still not widespread in the European financial
  • community.

  • is almost a pure interdealer market with little volume in the dealer to client space.

The report includes an analysis of the state of the European repo market in terms of volume growth, adoption of electronic trading and drivers for evolution. It also examines the interbank platforms ICAP-Brokertec, MTS MMF, and Eurex Euro Repo, providing annual daily turnover, estimated marketshare and describing development strategy. Two providers of order matching systems, ETCMS and Trax II, are also briefly analysed in this report.

The 32-pages report contains 23 figures and 4 tables.

A table of contents is available online.

of Celent's Institutional Securities & Investments research service can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Paris, France 6 June 2007

European Repo Market

Executive Summary 3
Definition 4
  General Structure 4
  Maturities 6
  Type of Repo Transactions 7
  Market Participants 8
Market Overview 10
  Market Size 10
  Collateral in European Repo Market 11
  Market Participants 14
Trading Mechanism 16
Electronic Trading Platforms 20
  ICAP-BrokerTec 24
  MTS MMF 25
  Eurex Repo 27
Order Matching System 30
Future Trends 32

 

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