TP ICAP's Nichola Hunter and Adam Southern speak to Carmella Haswell about the firm's new "front-end refresh" and wider plans to drive the growth of its eRepo platform
Global financial market infrastructure firm TP ICAP is working to establish its place in the market following “significant growth” on the platform in 2023. With Germany and France becoming its strongest performing regions in Europe, the team aims to build on this success within the gilt market.
Headquartered in London, the firm recorded a 132 per cent year-on-year increase in notional volume traded on the TP ICAP platform for 2023. This trend has improved through the year, with December up 167 per cent compared with the same period in 2022.
TP ICAP acts as an interdealer broker, energy and commodities broker, and provider of over-the-counter (OTC) pricing data. It aims to provide clients with access to global financial and commodities markets, improving price discovery, liquidity and distribution of data through responsible and innovative solutions.
According to Adam Southern, eRepo manager at TP ICAP, last year was “a significant year for us on the platform in terms of establishing ourselves in the market”. In November, TP ICAP’s average traded daily notional in Germany was €37 billion, with France reaching €30 billion per day. “The two countries are some of the biggest within the repo market. It is great that we now represent a solid market share,” he adds.
As the firm reviews next steps for 2024, it strives to build on this success in the gilt market, which it describes as “important and concentrated”. The TP ICAP team will be focusing on building liquidity, working with key market participants, and creating the necessary incentives to get participants trading gilts on the eRepo platform.
A competitive landscape
eRepo is a high availability, low latency central limit order book platform that services the inter-dealer market. Offering core and semi-core government bonds with straight-through processing (STP) connectivity, eRepo also provides connectivity via a graphic user interface (GUI), as well as API integration. According to Southern, the firm trades 12 country debts, all either cleared by LCH or bilaterally. The company aims to expand the number of debt instruments offered on the platform in the coming year.
The platform — designed to help market participants manage high volume demands in the European repo market — celebrated a milestone in September when it recorded a volume of £100 billion in one trading day.
TP ICAP’s Nichola Hunter, global head of fixed income sales and trading, and chairman of iSwap, comments: “With any order book in the market, there is a tipping point. eRepo has been around for quite a while. We historically carved out a niche as being a disaster recovery alternative to the main incumbent. We would see increased volumes on days where our main competitors had a system issue, for example. The market demands competition — competition drives innovation.”
The repo market has grown exponentially, as evidenced by the International Capital Market Association’s (ICMA’s) European Repo Market Survey. The survey measured and analysed the value of outstanding repo and reverse repo on the books of 62 participants at close of business on 14 June 2023. The total size of the survey grew 11.5 per cent YoY to a record €10,794 billion.
For its clients, TP ICAP identifies Germany, France and Spain as hosts of opportunity in a growing repo market. According to Southern, Germany was once ahead of France in terms of traded notional volumes on the TP ICAP platform, but notes that there is now a more equal footing between the two regions. As a result, Southern indicates that “banks may now see this as an equally safe asset to Germany”.
Similar growth has been identified in Spain. In 2024, Southern expects that this region will move from a buy and sell back market to ‘classic repo’, “joining the rest of the EU countries in streamlining the process for banks”. He anticipates opportunities for clients in Euro GC+ in the region, which look to gain popularity this year.
A drive in technology
Technology is core to the functioning of the securities finance industry, with regulatory authorities pushing for further automation to streamline the trade lifecycle process. This has become evident through the introduction of the Central Securities Depositories Regulation (CSDR) and the impact of the Securities Financing Transactions Regulation (SFTR), which caused firms to alter their operational processes.
Southern indicates that with advances in financial technology, banks have an appetite to streamline the whole trade lifecycle process, from price discovery, order entry and into post trade and analytics. “[Banks] are using algorithms to assist the traders, as well as using STP,” he continues. “In addition, we are now seeing more integration with settlement — which will continue in 2024.” Southern remarks that banks will look to automate the trade lifecycle process as much as possible to reduce risk and optimise execution.
From a TP ICAP perspective, the firm is focused on migrating to its technology platform, Fusion, which has become a key objective for the company on the eRepo platform. Fusion is an electronic platform that aims to provide more client-led technology and deeper liquidity. Its purpose is to give traders an improved trading experience in terms of speed, reliability and ease of trading. Fusion provides a number of features including single login access and access to aggregated liquidity for specific asset classes.
Moving forward, the team plans to incorporate additional features into the platform, such as giving traders the ability to click on an ISIN and review the historical pricing data of that particular bond. TP ICAP will also introduce new order types, such as switch trading, for mid-year 2024.
“Technology is such a major component of the TP ICAP strategy, specifically our Fusion distribution, which encompasses a whole host of things including front end, API connectivity, and post-trade services,” says Hunter.
From an eRepo perspective, TP ICAP’s focus will be on refreshing its front end to reach a broader spectrum of dealers — including smaller regional dealers. Hunter adds: “Ultimately, Fusion is the window into TP ICAP across all of the asset classes. Getting eRepo distributed through a new light weight, functionally rich GUI will be highly beneficial for the end users.”
TP ICAP will continue to focus on its “front-end refresh” — Fusion — which is of “critical” importance for the eRepo platform. The firm will also continue on a partnership path with third-party integrators to collaborate and integrate its APIs.
Concluding, Hunter remarks: “It is important to have competition in a marketplace, it drives innovation and pricing, which is healthy in a market. There needs to be liquidity and critical mass in an order book environment — that takes time, effort and trust from participants. For 2023, we exceeded expectations and put foundations in place that put us in a good position to continue that growth trajectory for 2024.”
