Eurex says it expects the number of participants in the Swiss franc repo market on Eurex Repo to double over the next two years as the Swiss National Bank (SNB) steers its Lombard facility through the platform from next year.
A further 80 banks can be expected to be connected to Eurex Repo when this happens, says Eurex. At present, over 100 participants are active in the Swiss franc repo market at Eurex Repo, generating a volume of around CHF 50 billion.
“The overnight repo business via the Eurex Repo electronic trading platform will take the place of the traditional Lombard facility for the banks in the future,” says Dr. E. Sprndli, head of Financial Market Operations at the Swiss National Bank. “The repo system has been expanded in several steps and has proved to be secure and efficient. The Eurex Repo trading platform is used for monetary-policy transactions as well as the auctions for bonds and registered money-market claims of the Swiss confederation.”
The Swiss National Bank uses repo transactions to make intra-day liquidity available to the banks. Repo transactions are also being used to an increasing degree to balance out the liquidity in Swiss francs between the various banks, because a bank that has a Lombard credit limit use it to bridge an unexpected shortage of liquidity. In the future, use of the Lombard facility will be made by means of repo transactions, which the central banks believes will enable securities to be managed more efficiently.
Eurex Repo adds that it is also expecting the “electronization” of the repo markets to accelerate in the euro repo area, where currently only about 10 per cent of the outstanding volume is being traded electronically via a Central Counterparty (CCP).