Capital efficiencies through direct access

Repo clearing models for the buy-side

Banks and other complex financial institutions continue to face challenges in meeting return on equity (ROE) expectations. This is due to the substantial balance sheet de-risking and unprecedented regulatory reform in the wake of the global financial crisis of 2007/08 and subsequent market conditions such as the European sovereign debt and the recent COVID-19 crises.

The trading of repurchase agreements (repo) is a cornerstone of the wholesale financial markets. Repo markets provide a core source of funding, facilitate collateral mobilization, and are a key transmission mechanism for monetary policy. However, post-crisis reforms to banking institutions' capital and liquidity requirements have profoundly impacted the repo market.

This whitepaper provides a case study that explores Eurex’s repo clearing models for sell-side and buy-side clients and the opportunities they afford for balance sheet, leverage, and risk-based capital optimization.


Regulatory capital requirements are driving banks to carefully ration scarce balance sheet capacity, with repo markets most significantly impacted.

Eurex’s ISA Direct models allow buy-side firms to directly access CCPs, which offers substantial balance sheet and capital efficiencies for banks and creates capacity for business growth.

Buy-side firms benefit from broader access to funding and investment sources and the potential for more attractive execution terms.

Demonstrated stability of cleared European repo markets will further support financial stability and monetary policy transmission objectives.

Contact

Eurex Repo

Repo.Sales@eurex.com