08 Feb 2022

Eurex | Eurex Clearing | Eurex Repo

European Repo in 2021 – Eurex and beyond

After the unprecedented events of 2020, some measure of calm returned to financial markets in 2021 despite the continuing, and in many respects intensifying, pandemic. As we get started into 2022, we take a look at what 2021 held for Eurex Repo and the broader European market.

Looking at the broader European repo market in 2021, a great deal of focus was placed on the potential for collateral shortages at year-end; however, thanks to significant early positioning and good accessibility to national Central Bank lending programs, the core market over year-end remained orderly, but the second most expensive in recent years. Despite this, some issues with non-core markets – for instance, with Italian and Spanish collateral – did catch some market participants off-guard in the Eurex Repo markets.

Closer to home, 2021 saw Eurex Repo 20th birthday and both colleagues and clients looked back on two decades of successful innovation at several events, both in Frankfurt and further afield. Notable highlights of Eurex Repo’s first 20 years include the launch of GC Pooling with Clearstream colleagues in 2005, several collateral and currency extensions for GC Pooling, access for buy side firms since 2016, our Repo Partnership Program in 2018, and the Eurex Repo Green Bond Basket in 2020. And regulatory approval for Eurex’s new ISA Direct Indemnified model in 2021 has set the stage perfectly for the next 20 years of innovative solutions.

Looking in more detail at 2021, the year saw 3.4 million quotes offered on our F7 platform, resulting in 98,000 trades – an increase of 22.5 percent on 2020’s total. 2021 was also the best year for growth in the Repo Market, with sovereign bond and SSA repos reaching EUR 100 billion in volume – overall average term adjusted volume grew by 3.3 percent year-on-year. Year-end activity started as early as mid-September with trading volumes in Q4 up by 84 percent compared to 2020. This positive trend continued into 2022, especially in Bunds and Spanish government bonds where we had the greatest year-on-year growth. Overall average term-adjusted volumes increased by 62 percent in January, with a 118 percent increase in the Repo Market.

And nearly 20 new licenses were issued throughout 2021 and in January 2022, with nine coming from the buy-side. These included, among others, the Dutch pension manager MN and the leading French bank La Banque Postale.

As ESG themes gain in prominence across both real economies and the financial markets, Eurex Repo has built on the launch of the Green Bond Basket in 2020. The new German Federal Government 30-year Green Bond, launched in May 2021, is eligible for both, the Green Bond GC Basket and for margin collateral at Eurex Clearing. And the total volume of trading in EU/NGEU bonds has risen steadily throughout the year, with regular quoting activities from several banks and the share of EU bonds in Supranational and Agency trading activity rising to above 30 percent. Indeed, green collateral has now become an integral part of Eurex Repo’s business.

Some other statistical highlights from 2021 at Eurex Repo include:

  • 56 percent of all GC Pooling trades were in the ECB basket, with 24 percent in the EXT basket and 9 percent in the INT MXQ.
  • The largest trade this year was EUR 2.7 billion in GC Repo.
  • Daily average term adjusted volume of French and Spanish bonds grew by 21 percent and 107 percent, respectively.
  • The average duration of all trades in 2021 was 4.6 days, down from 5 days in 2020.
  • An incredible total of EUR 11.5 trillion was traded in 2021.

This year, we will continue to serve our clients with our modified Repo Partnership Program to gain more market share in this segment. Furthermore, we will focus on extending our buyside coverage and driving the onboarding of pension funds and insurance companies, as well as hedge fund with our new ISA Direct indemnified model. We also expect to see the cyclical recovery of GC Pooling, where we will support clients across all baskets and currencies so they can benefit from balance sheet netting and cross-product opportunities at Eurex. We look forward to another year of fruitful partnerships and interesting market developments.

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