Eurex Repo, the marketplace for international, electronic repo trading and secured funding, plans to extend the maximum term of tradable securities for the Eurex Repo markets such as GC Pooling and Euro Repo.
Currently, the maximum duration for transaction is one year; as of 21 January, customers can also trade terms of up to two years.
With this step, Eurex Repo provides its market participants with a new and easy-to-use opportunity to make use of the repayment option of the Long Term Refinancing Operations of the European Central Bank (ECB). Starting on the 30 January, the ECB will allow banks for the first time to prematurely return LTRO liquidity which they borrowed from the ECB in December 2011 and February 2012 with a maturity of three years. The fixed rate for the ECB loan is significantly higher than the current interest rate in the market.
“In close coordination with our participants, we have realised this innovative extension within a short time frame. It is a reflection of market demand and will help banks to re-allocate their funding necessities to a cost-sensitive, secure and efficient alternative like our GC Pooling market,” says Marcel Naas, managing director of Eurex Repo. ‘The market consultation revealed that the current liquidity situation expressed by a flat yield curve shifts market activity significantly into longer terms, in the OTC markets especially into terms over one year.’
With this extension, Eurex Repo aims to further bolster volume growth. In 2012, Eurex Repo was again able to grow significantly year-on-year in its Euro markets. The GC Pooling market increased by 23 per cent and recorded an average outstanding volume of EUR145.4bn, a new record. The Euro Repo market achieved an average outstanding volume of EUR36.1bn, also a new record and an increase of 19 per cent.
In terms of participants, Eurex Repo has also grown. The GC Pooling market connected 22 new members in 2012, reaching 105 users. The Euro Repo market totalled 116 participants, also an increase of 22 members.