The International Capital Market Association (ICMA) has released the results of its 12th semi-annual survey of the European repo market. The survey, which is effectively a snapshot of the volume of repo trades outstanding on 13 December 2006, shows market size at over €6,430 billion (EUR 6.4 trillion), an annual increase of 14 percent over 2006, compared with an increase of 18 percent in 2005.
The total value of repo contracts outstanding on the books of the 74 institutions who participated in the latest survey rose to €6,430 billion compared to €6,019 billion in June 2006 (based on 79 survey responses) and €5,883 billion in December 2005. The growth in the market in the last 6 months of 2006 reflects healthy activity in the underlying European debt securities market over this period.
The survey also indicates a renewed boom in electronic trading of repo which now accounts for 23.3 percent of trading. Most significantly, the share of anonymous trading on electronic systems rose from just 8.7 percent of the total business to over 14 percent in December. By comparison the market share of voice broking continued to contract falling to a new low of 19.8 percent.
“Growth in the repo market continues and although the sample of banks covered by this survey has gone down it is clear that there is a strong upward trend in outstanding volume,” says Godfried De Vidts, the Chairman of ICMA’s European Repo Council. “Repo is becoming a commoditised business hence the growth of electronic trading and in particular growth in anonymous trading volumes through a central counterparty. The continuous drive by the EU Commission through various initiatives to make clearing and settlement more efficient and ongoing ECB discussions regarding Target 2 Securities should mean that clearing and settlement of this high volume business will become cheaper. As chairman of the European Repo Council I appeal to all banks active in this market to participate in the survey as it is an essential tool for development in this market.”