What the Future Holds
There are four main areas of development which will help enhance the repo market. These are electronic trading platforms, emerging markets (domestic and international), the triparty repo sector and repo on structured products. We encourage you to revisit this section of the site for updates on the repo market.
Electronic Trading Platforms
The future of the repo market belongs mostly to trading platforms, which are bound to gain an ever-increasing market share at the expense of OTC telephone trading and booking. The repo market will benefit from such systems, which can provide a fully computerised trading platform,
straight through processing (STP), a user-friendly interface as well as a cost-attractive solution. The use of the electronic platform lowers the barrier to entering this market as well as contributing towards information transparency. Existing clients with access to the client portal can view an example of our internal UBS repo quotes (your client username and password required) internal UBS repo quotes.
If you currently do not have access to our award-winning client portal suite of services, please contact your UBS representative.
This example of an external electronic platform shows various bonds with two-way prices, which are submitted by various investment banks. There has been a significant growth in these trading platforms, which have all helped increase market transparency and price competition.
Emerging Markets
We expect the centre of gravity for emerging markets to move further to the east as Asia becomes more involved in the repo market. Other countries that are likely to play a bigger role include Romania, Turkey and the Latam bloc, including Mexico, Argentina, Brazil and Venezuela. Emerging market repo will develop significantly in domestic rate trading.
Triparty Repo
For triparty repo, the following major developments would boost the growth of the repo market as a whole:
- Standardisation of triparty collateral schedule sets to enable a transparent market, which could trade on an automated screen basis
- Use of triparty to collateralise other product exposure, such as OTC derivative margin exposure
- Expanding to a wider client base such as leveraged funds
- As undocumented markets such as Italy and Spain move towards more documentation, this will open opportunities to trade triparty
- Triparty mechanism to be used in European Central Bank collateral pledging
Structured Products
As the security markets continue to develop in sophistication, so does the need for custom made structures. The advent of CDO, CLO, ABS, MTN, etc have spurred a need for financing any of these structured products or a combination. The repo markets follow the trend and gain in sophistication, tailoring their skills to the new market demands.
Although repo financing for structured products will remain the focus of a few specialist service providers, it is anticipated that this sector of the market will witness significant growth and global market penetration. UBS has a structured products team that can advise on repo financing requirements in all time zones.
