Paris, France
6 June 2007 The
European Repo Market
Report Published by Celent
Celent predicts the European repo market
will continue to grow significantly due to Basel II.
The 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. The European repo market will
continue to grow significantly due to Basel II, according to a new report
from Celent, The European Repo Market. Continued growth will
generate significant opportunities for financial institutions, e-trading
platforms, and order matching systems providers.
But while the European repo market 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 the European
repo market 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 the
European repo market," 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.
- The European repo market 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.
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