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The International Capital Market Association (ICMA) has published analysis of the key market features and trends in the European repo market.
Reporting on the EU’s Securities Financing Transactions Regulation (SFTR) went live on 13 July 2020, making this publication an analysis of the first full year of SFTR reported data.
The analysis relies on the summary statistics, which authorised trade repositories (TRs) are required to provide under SFTR on a weekly basis.
The report is broken into two parts which cover the first six months of the EU-28 repo market and the EU-27 and the UK market segments. This reflects the split of SFTR reporting into separate EU and UK regimes following the end of the Brexit transition period.
The initial phase in SFTR repo data, between the weeks ending 24 July and 11 September, saw a rapid rise in new transactions over the first two weeks to a plateau averaging €3.1 trillion and 95,000 transactions per day, according to the report.
Between the weeks ending 16 October and 18 December, the data revealed a rise in transactions, which reached a higher plateau averaging around €3.5 trillion and 109,000 transactions per day.
The majority of growth between September and October is expected to reflect the arrival of latecomers and the industry’s progress in familiarising itself with SFTR.
Additionally, the report, which was authored by Richard Comotto, reflects on some of the remaining issues with the quality of the SFTR public data, with data on collateral being recognised as the biggest problem.
The report explained how repos swing between gross under- and over-collateralisation. In the final week of the first year of SFTR, new repos in the EU were on average only 55 per cent collateralised. In week 9, the rate of collateralisation of repurchase transactions published by one TR peaked at 1484517 per cent. On occasion, there has even been negative average collateralisation.
ICMA will continue to work with members of the ERCC SFTR Task Force, including reporting firms, TRs and the relevant service providers, to identify and address outstanding issues with SFTR reporting, helping to improve the quality of the reported data.
The regulator will also aggregate and publish SFTR public data on a weekly basis, alongside detailed analysis on an ad-hoc basis, as part of its commitment to supporting an efficient and transparent repo market.
An article announcing the publication of ICMA’s paper titled ‘the first year of SFTR public data on repo’ was published by SFT yesterday.
