ICMA ERCC reveals update to European repo guide
03 November 2023 Europe
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The International Capital Market Association (ICMA) has updated its best practice guide on the European repo market following 18 months of consultations with members.
Created by ICMA鈥檚 European Repo and Collateral Council (ERCC), the guide is designed to avoid uncertainty and disagreements among market participants, helping to foster a more efficient and orderly repo market in Europe.
After receiving feedback from ERCC members, ICMA has updated a number of areas within the , including interest claims and Central 麻豆传媒 Depositories Regulation (CSDR) cash penalties, repo re-rates, re-sizing repo and ways of clearing up accrued interest.
In the revised document, the term 鈥榬e-rate鈥� refers to an agreed change in the repo rate on fixed-rate repos, including open repos not linked to an index.
However, the document states that an 鈥渁greed change in the spread in the case of a repo paying a periodically-refixed index plus or minus a spread in basis points, but not to regular changes in the index,鈥� are better described as a 鈥渞e-set鈥� or 鈥渞e-fixing鈥�.
The guide warns that cleaning-up accrued repo interest by terminating and then replacing a transaction will generate additional settlements and cost, as well as additional reporting requirements.
ICMA鈥檚 ERCC indicates that it is therefore best practice when cleaning-up accrued repo interest to do so by modifying the terms of a transaction and making only an interest payment.
The ERCC Guide is a flagship document for ICMA and provides detailed guidance, best practice recommendations and clarifications that are intended to support the trading and settlement of repos.
First published in 2014, the document has since been regularly reviewed and updated to ensure that the guide continues to accurately reflect current market practice.
Created by ICMA鈥檚 European Repo and Collateral Council (ERCC), the guide is designed to avoid uncertainty and disagreements among market participants, helping to foster a more efficient and orderly repo market in Europe.
After receiving feedback from ERCC members, ICMA has updated a number of areas within the , including interest claims and Central 麻豆传媒 Depositories Regulation (CSDR) cash penalties, repo re-rates, re-sizing repo and ways of clearing up accrued interest.
In the revised document, the term 鈥榬e-rate鈥� refers to an agreed change in the repo rate on fixed-rate repos, including open repos not linked to an index.
However, the document states that an 鈥渁greed change in the spread in the case of a repo paying a periodically-refixed index plus or minus a spread in basis points, but not to regular changes in the index,鈥� are better described as a 鈥渞e-set鈥� or 鈥渞e-fixing鈥�.
The guide warns that cleaning-up accrued repo interest by terminating and then replacing a transaction will generate additional settlements and cost, as well as additional reporting requirements.
ICMA鈥檚 ERCC indicates that it is therefore best practice when cleaning-up accrued repo interest to do so by modifying the terms of a transaction and making only an interest payment.
The ERCC Guide is a flagship document for ICMA and provides detailed guidance, best practice recommendations and clarifications that are intended to support the trading and settlement of repos.
First published in 2014, the document has since been regularly reviewed and updated to ensure that the guide continues to accurately reflect current market practice.
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