Repo markets enhance OTC derivatives, says ICMA
11 January 2018 Zurich
Image: Shutterstock
鈥淲ell-functioning repo markets enhance the robustness of both the bilateral over-the-counter (OTC) derivatives market and the recently encouraged centralised clearing facilities鈥, according to International Capital Market Association (ICMA) chair, Godfried De Vidts.
De Vidts, who is also director of European Affairs at NEX, made the statement in ICMA鈥檚 first quarter report of 2018, adding that the 鈥済overnment and corporate bond markets need liquid secured financing markets, mainly repo or securities lending [as] the non-banking sector needs to be able to efficiently mobilise cash and collateral used by different types of investors, to broaden their liquidity and risk management and investment strategies鈥.
In terms of European repo and collateral market developments, ICMA gave details about the EU鈥檚 proposed rules on recovery and resolution of central counterparties (CCPs).
The report stated that 鈥渢o determine [that] the tools to be provided for CCP recovery and resolution (R&R), consistent with our discussions on this topic, the European Repo and Collateral Council (ERCC) has focused on seeking to ensure that variation margin gains haircutting is clearly not to be applied to repo variation margins鈥.
For Basel III鈥檚 post-crisis regulatory reforms, ICMA said that in terms of the leverage ratio, it acknowledged the need to continue to monitor its impact on securities financing transactions (SFTs), markets and market liquidity.
It added that detailed provisions continue to be in line with Basel Committee on Banking Supervision鈥檚 January 2014 leverage ratio review.
The report also included new information on the reuse of securities collateral, and new requirements to report SFTs to a trade repository by T+1.
Alluding to Article 15 of the 麻豆传媒 Financing Transactions Regulation (SFTR), the report explained how Article 15 laid down new requirements for the reuse of securities provided as collateral under all security and title transfer collateral arrangements.
It also warned market participants that they will need to prepare for SFTR, monitoring its ongoing developments, before its full implementation.
ICMA also alluded to the second Markets in Financial Instruments Directive (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) investor protection.
It said the European 麻豆传媒 Market Authority confirmed that securities financing transactions SFTs are 鈥渋nside the scope鈥 of the MiFID II record keeping requirements, according to Article 16(6) of the regulation.
De Vidts, who is also director of European Affairs at NEX, made the statement in ICMA鈥檚 first quarter report of 2018, adding that the 鈥済overnment and corporate bond markets need liquid secured financing markets, mainly repo or securities lending [as] the non-banking sector needs to be able to efficiently mobilise cash and collateral used by different types of investors, to broaden their liquidity and risk management and investment strategies鈥.
In terms of European repo and collateral market developments, ICMA gave details about the EU鈥檚 proposed rules on recovery and resolution of central counterparties (CCPs).
The report stated that 鈥渢o determine [that] the tools to be provided for CCP recovery and resolution (R&R), consistent with our discussions on this topic, the European Repo and Collateral Council (ERCC) has focused on seeking to ensure that variation margin gains haircutting is clearly not to be applied to repo variation margins鈥.
For Basel III鈥檚 post-crisis regulatory reforms, ICMA said that in terms of the leverage ratio, it acknowledged the need to continue to monitor its impact on securities financing transactions (SFTs), markets and market liquidity.
It added that detailed provisions continue to be in line with Basel Committee on Banking Supervision鈥檚 January 2014 leverage ratio review.
The report also included new information on the reuse of securities collateral, and new requirements to report SFTs to a trade repository by T+1.
Alluding to Article 15 of the 麻豆传媒 Financing Transactions Regulation (SFTR), the report explained how Article 15 laid down new requirements for the reuse of securities provided as collateral under all security and title transfer collateral arrangements.
It also warned market participants that they will need to prepare for SFTR, monitoring its ongoing developments, before its full implementation.
ICMA also alluded to the second Markets in Financial Instruments Directive (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) investor protection.
It said the European 麻豆传媒 Market Authority confirmed that securities financing transactions SFTs are 鈥渋nside the scope鈥 of the MiFID II record keeping requirements, according to Article 16(6) of the regulation.
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