SECURITIES LENDING & REPO MARKETS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - OCTOBER 2010

OVERVIEW OF THE SECURITIES FINANCING MARKETS

According to ICMA, the European repo market reached € € 5,582bn in December 2009 in terms of outstanding contracts. Despite its late start, the European repo market is now larger than its US equivalent. Figure 17 displays the evolution of the European market size between 2001 and 2009, with a bounce in December 2009 after a significant decrease at the end of 2008 in the middle of the financial crisis. The need to move to from unsecured lending to collateralised financing is the central driv- ing force of the repo market. The growing trend of the market is likely to continue unabated under Basel II.

Figure 17: European repo market size from 2001 to 2009

8000

7000

6,430 6,382

6000

5,883

5,582

5000

5,000

4,633

4000

In €bn

3,788

3,377

3000

2,298

2000

1000

0

December 2009

December 2008

December 2007

December 2006

December 2005

December 2004

December 2003

December 2002

December 2001

Source: 18th ICMA survey, March 2010

In terms of cash currency, a large majority of repos in Europe are in euro (65.6% as at De- cember 2009 according to ICMA’s survey), US dollar and pounds sterling coming well behind (see figure 18).

Figure 18: Cash currency analysis in the European repo market as at December 2009

JPY 2.7%

CHF 0.5%

OTHER 0.5%

DKK, SEK 2.4%

USD 15.9%

EUR 65.6%

GBP 12.3%

Source: 18th ICMA survey, March 2010

page 28 | Securities Lending & Repo markets