Asia-Pacificrepo market survey
June 2021(published December 2021)

Asia-Pacific repo market survey

1Author: Richard Comotto© International Capital Market Association (ICMA), Zurich, and ASIFMA, Hong Kong, 2021. All rights reserved.
No part of this publication may be reproduced or transmitted in any form or by any means without permission from ASIFMA and ICMA. This reportis intended for general information only and is not intended to be nor should it be relied upon as being legal, financial, investment tax, regulatory,
business or other professional advice. Users of this report should seek appropriate independent advice before entering into any kind of specifictransaction. While the information contained in this report is taken from sources believed to be reliable, neither ASIFMA, ICMA nor the authors
represent or warrant that it is accurate, suitable or complete and neither ASIFMA, ICMA nor the authors shall have any liability arising from or relating
to the use of this report and its contents.

Asia-Pacific repo market survey

2About ASIFMA and ICMA
Asia Securities Industry and Financial
Markets Association (ASIFMA)

International Capital Market
Association (ICMA)ASIFMA is an independent, regional trade association
with over 150-member firms comprising a diverse rangeof leading financial institutions from both the buy andsell side, including banks, asset managers, law firms
and market infrastructure service providers. Together,
we harness the shared interests of the financial industry
to promote the development of liquid, deep and broad
capital markets in Asia. ASIFMA advocates stable,
innovative and competitive Asian capital markets that arenecessary to support the region’s economic growth. We
drive consensus, advocate solutions and effect changearound key issues through the collective strength andclarity of one industry voice. Our many initiatives include
consultations with regulators and exchanges, developmentof uniform industry standards, advocacy for enhanced
markets through policy papers, and lowering the cost of
doing business in the region. Through the GFMA alliancewith SIFMA in the United States and AFME in Europe,
ASIFMA also provides insights on global best practices
and standards to benefit the region.

ICMA promotes well-functioning cross-border capital
markets, which are essential to fund sustainable economic
growth. It is a not-for-profit membership association with
offices in Zurich, London, Paris, Brussels and Hong Kong,
serving around 615 member firms in 65 jurisdictions.
Among its members are private and official sector issuers,
banks, broker-dealers, asset managers, pension funds,
insurance companies, market infrastructure providers,
central banks & law firms. It provides industry-driven
standards and recommendations, prioritising four core fixedincome market areas: primary, secondary, repo & collateraland sustainable finance. ICMA works with regulatory andgovernmental authorities, helping to ensure that financial
regulation supports stable and efficient capital markets.

www.asifma.org

Since the early 1990’s, ICMA has played a significant rolein promoting the interests and activities of the international
repo market, and of the product itself. The European Repo
and Collateral Council (ERCC), a special interest group
established under the auspices of ICMA, represents the
major firms active in Europe’s cross-border repo markets.
www.icmagroup.org

Asia-Pacific repo market survey

3

The survey
ICMA’s European Repo and Collateral Council (ERCC) and ASIFMA’s Secured Funding Markets Committee have been cooperating to extend the ICMA’s semi-annual survey of the European repo market to the Asia-Pacific (APAC) repo market.
Co-operation started in June 2016 with the addition of a number of questions to the ICMA’s European survey to provide
greater granularity about APAC repo executed in Europe.
In December 2016, a pilot survey of repo desks located in the APAC region was conducted using a questionnaire basedon that for the European survey.
The first regular APAC repo market survey took place in June 2020. The latest survey was conducted on June 9, 2021.
The surveys are being timed to coincide with the ICMA’s mid-year semi-annual European repo market survey.
The participants in the joint APAC survey are largely international banks. Consequently, the business encompassed tends
to be cross-border rather than domestic repo.

Methodology of the APAC survey
The survey broadly follows the methodology of the European survey, except for a more relaxed definition of repo (toinclude ‘pledged repo’):• APAC repo has been defined, for the purposes of the survey, as repos (1) involving at least one party dealing from alocation in the APAC region in any currency or against any collateral or (2) between parties located anywhere but in an
APAC currency and/or against collateral issued in the APAC region.
• Respondents were asked to identify the location of repo desks executing transactions rather than the location where thetransactions were booked. This has been challenging for many banks.
• Repo has been defined for the purposes of this survey to include instruments that do not conform to the standard definitionof repo as an instrument that transfers title to collateral, eg some Chinese ‘pledged repo’ and Japanese ‘gentan’.
• The European and Asian surveys measure the value of repos and reverse repos outstanding at close of business on thesurvey date rather than turnover over a period. This snapshot of the market at one point in time understates the volumeof short-term transactions, given that many of these run off between survey dates, but provides a meaningful picture of
exposures.
• The results have not been adjusted for double-counting where the same transaction has been reported by two survey
respondents.
• The results do not include repos by central banks which were part of their open market operations.
A key difference with the European survey has been to split the APAC survey into two parallel surveys, one for trading inJapan and the other for trading elsewhere in the APAC region.

Asia-Pacific repo market survey

4New data about APAC repo in the European survey (June 2021)• APAC repo accounts for a small, although not insignificant, share of the European market.
• The Japanese yen is overwhelmingly the main APAC currency traded in the European repo market.
• The European repo market is a net borrower of collateral issued in the APAC region.
• The most common APAC collateral traded in the European repo market is Japanese, of which 76% were JGBs.
APAC counterparties accounted for 4.3% of total outstanding value of repos and reverse repos reported by European
dealers, down from 5.3% in December 2020. In terms of outstanding value, business with APAC counterparties fell to
EUR 365 billion from EUR 431 billion.
In the European survey, 4.0% of transactions with APAC counterparties was in repos and 5.1% in reverse repos,
compared with 4.0% and 6.7%, respectively, in June 2020. European dealers have therefore been net cash lenders (netcollateral borrowers) but their net cash position contracted by 2021, which reflected a cut in gross cash lending.
APAC currencies accounted for 6.3% of total outstanding repos and reverse repos traded in Europe, little changed from
6.7% in June 2020. Japanese yen accounted for 5.2% (down from 5.7%). Reverse repos accounted for about 57% oftransactions in yen and 60% in other APAC currencies (unchanged from the 2020 survey). In other words, European
dealers remained net lenders of yen and other APAC currencies.
The overall share of APAC issued collateral repoed out and reversed in by European dealers was 5.1%, compared with 8.0%
in the previous survey. These changes were largely driven by Japanese collateral, in particular, by JGBs. Japanese collateralaccounted for 4.7% and JGBs for 3.5% of the outstanding value of the survey (compared with 6.4% and 4.8%, respectively,in June 2020). In addition, 0.4% of collateral in the European survey was issued in “other OECD APAC” countries; 0.6% was
non-OECD APAC collateral; and 0.4% was in APAC eurobonds (all very similar shares to the last survey).

Survey results of the June 2021 APAC survey
SummaryJapan• The Japan survey sample was slightly larger than in 2020.
• There were few major changes in the composition of repo business reported in the Japan survey. The most noteworthy
were increased business with European counterparties, although less in euros, and more against US Treasuries.
• The overwhelming share of reported repos was still executed directly between parties by telephone and electronic messaging.
• Voice-brokers continued to play a more significant role in Japan than in the rest of Asia.
• Automatic and automated trading remained very limited in Japan, more so than in the rest of Asia.
• CCP-clearing accounted for a large share of outstanding business, albeit less than in Europe.
• Unsurprisingly, the Japanese yen remained predominant in the Japan survey, with the remaining business mainly in US dollars.
• The Japan survey continued to be largely in the form of gentan repo, which is very different to the composition of theJapanese market as reported by the Bank of Japan and the JSDA (which report mostly gensaki repo).
• All the reported transactions in the Japan survey continue to be fixed-rate.
• The maturity distribution of the Japan survey was still similar to that of the ICMA European repo survey with two
exceptions: forward repos were even more prominent; and there was minimal business beyond three months.
• As expected, Japanese securities continued to dominate the Japan survey, particularly JGBs. US Treasuries had a small share.
• Most transactions in the Japan survey were documented under the GMRA.

Asia-Pacific repo market survey

5Other APAC
• The non-Japan APAC survey was materially larger than in 2020.
• The non-Japan APAC survey sample largely traded US dollars, Australian dollars and euros against US, Australian andEuropean collateral.
• The major changes in the composition of repo business in the APAC region outside Japan were a switch to net cash
lending by the survey sample, more cross-border business, especially with counterparties in Europe, a drop in tradingin JGBs but a jump in eurozone government securities and euros, more trading in US dollars and US Treasuries, more
fixed-rate business, a fall in remaining maturities between one and six months but a jump in forward and open repos.
• The bulk of reported repo business remained cross-border, a significant share of which was still with counterparties inother APAC countries and Europe.
• Once again, the overwhelming share of reported repos was executed over-the-counter (OTC) directly between parties
by telephone and electronic messaging.
• Voice-brokers played a modest role.
• Automatic and automated electronic trading was very limited. (Automated trading requires manual intervention to executea deal. Automatic does not).
• Little business was CCP-cleared.
• The predominant currency was again the US dollar but there was significant business in Australian dollars and euros.
About one-third of outstanding business was in Asian currencies.
• Transactions were overwhelmingly in repurchase transactions. There were small amounts of documented buy/sell-backs
and Chinese pledged repo.
• Most non-Japan APAC transactions were documented under the GMRA.
• Compared with the European survey, short-dated and floating-rate repos took smaller shares but open repos were more
important. Compared with Japan, there were more short dates and open repos.
• The overwhelming share of all collateral was non-government securities but the largest individual pools of collateral
were in US Treasuries, eurozone government securities and Australian government securities. There were also material
amounts of non-government US securities, JGBs, issues by international financial institutions and Chinese securities.
Asian securities in total accounted for over 40% of collateral.
Pledged repo is a collateralized instrument found in the Chinese domestic market. It is a loan secured by pledged
collateral rather than a transfer of legal title to the collateral. It is therefore not a true repo and is exposed to uncertainty
about the consequences of a default by an insolvent counterparty because the collateral rights of the non-defaulting
party will be subject to the statutory insolvency regime rather the contractual default management provisions of thecounterparties’ legal agreement.
Gentan repo is a collateralized instrument used by Japanese counterparties. It is a secured loan documented as a
cash-collateralized securities loan but is in reality a disguised repo (eg the cash amount stays constant). The reason for
packaging a repo as a securities loan was to avoid a securities transaction tax (now abolished) which applied to sale-andrepurchase transactions like repo but not to loans.
Gensaki repo is a collateralized instrument used by Japanese counterparties that has largely replaced the gentan repo.
It is a true repo. Gensaki repo have been though several evolutions. The latest version is equivalent to international-style
repurchase transactions documented under the GMRA.

Asia-Pacific repo market survey

6

Overview
The Japan survey reported an outstanding value of repos and reverse repos for the survey sample on June 9 of USD
202.9 billion, compared with USD 215.7 billion last year. Average daily turnover over the year to 9 June was almost USD
33 billion, with an average deal size of about USD 63 million. Repos were on average larger than reverse repos (USD 94
million versus USD 49 million).
The Japan survey sample was a net cash lender and net securities borrower (69% of outstanding value was in reverse
repos, down sharply from 95% last year) except in Australian dollar cash and collateral, repos against JGBs, gensaki andrepos with only one day remaining to maturity.
The non-Japan APAC survey reported USD 260.1 billion in outstanding value and an average daily turnover of USD 29
billion, compared with USD 216.7 billion and almost USD 37 billion per day in 2020. Average deal size was some USD 56
million, compared with USD 76 million in the last survey.
The non-Japan APAC survey sample switched in 2021 to being a net cash lender and therefore a net securities borrower(58% of outstanding value was in reverse repo, compared with 43% in the 2020 survey).

Geographical analysis
The major share of the outstanding business reported in the non-Japan APAC survey was cross-border withcounterparties in the APAC region (43%, compared with 48%) and European counterparties, whose share jumped to 41%
from 34% last year, at the expense of counterparties in Australia (5%, compared with 7%), Hong Kong (11% from 19%),“other APAC” countries (7% from 11%), the US and other regions (down to 16% from 20%).
The survey sample was a net cash borrower from China and the US. It switched to being a net cash lender to Australia,
Hong Kong and Europe.

Chart
1
Figure 1 – Geographicalanalysis- APAC excluding Japan
9%
5%

Europe6%other regions
41%

Hong Kong
Singapore

12%other Asian countries
Australia
China
11%
16%

Asia-Pacific repo market survey

7

Trading analysis
Parties in the Japan survey transacted 86% of their repos and reverse repos directly with their counterparties and 14%
via voice-brokers, presumably Tanshi brokers (compared with 83% and 17%, respectively, in the last survey). Electronic
trading remained negligible but almost 18% of outstanding value had been CCP-cleared, although this was down fromthe 30% reported in June 2020.
The survey sample continued to be a net cash lender to direct counterparties (but only 76% of the outstanding value of
direct transactions was in reverse repo, compared with 94% in 2020) and net cash borrowers in voice-brokered repo
(70% of the outstanding value of voice-brokered transactions were in repo, compared with zero last year). A very small
amount of reverse repo was transacted electronically.
As in the Japan survey, most of the business reported in the non-Japan APAC survey had been transacted directly
between parties (89%, compared with 94% in the previous survey). Over 3% had been transacted electronically,
compared with just under 2% in 2020. The remainder (8%, compared with 5% last year) had been arranged by voicebrokers. Just over 1% had been negotiated electronically and anonymously (on a platform connected to a CCP),
compared with just under 1% last year.
The survey identified 25% of outstanding value as having been negotiated between counterparties in the same country(down from 38% in 2020), 74% negotiated cross-border (up from 62%) and just 1% negotiated anonymously. Of thecross-border business, 27% was with counterparties in other APAC countries (down from 29%), 31% with European
counterparties (up from 20%) and 17% with counterparties in other regions, including the US (up from 13%). The trading
analysis differs from the geographical analysis in that it shows a lower share for counterparties in Europe (31%, comparedwith 41%). This may be due to differences between where a trade is executed and where it is booked and managed.
Figure 2 – TradingChart
analysis
2 - domestic v cross-border.
1%
17%
25%

domestic
cross-border to Asia
cross-border to Europe
cross-border to other regions
anonymous

31%
26%

The survey sample switched to net cash lending to counterparties in the same country (62% of the outstanding valueof domestic trades was in reverse repos, compared with 27% in 2020) and in cross-border transactions with Europe(reverse repos were 60%, up from 41%). There was also a switch to net cash borrowing in cross-border transactions
with “other regions” (repo was 59%, up from 34% in 2020). Cross-border business with APAC counterparties continued
to be net cash lending (62%, compared with 55%). CCP-cleared and electronically-traded transactions continued to be
overwhelmingly net cash borrowing.

Asia-Pacific repo market survey

8There was also a switch to net cash lending through directly-negotiated repos (58% was in reverse repos, the inverse of2020) and the survey sample remained a net cash lender via voice-brokers (63% was in reverse repos, down from 70%)
and a net cash borrower through electronic trading (81% was in repos, down from 90%).
Figure 3 – Trading analysis - type of venue

Chart 3

8%

3%

14%

directvoice-brokered

APAC ex-Japan

automated trading systems

86%

Japan

89%

Asia-Pacific repo market survey

9Currency analysis
The bulk of the business reported in the Japan survey continued to be in Japanese yen (84%, compared with 86% in2020). This was slightly higher than Bank of Japan statistics for the domestic market (82% in August 2021). Most of theremainder was in US dollars (13%, compared with 8% in the 2020 survey). The share of euros fell below 3% from 5% andAustralian dollars dropped below the 1% recorded in 2020.
The survey sample was a net lender of all currencies except Australian dollars. The US dollar position of the survey sample
is consistent with the reported position of foreign dealers in the domestic market as reported by the Bank of Japan, where
they are mainly lenders of dollars, usually to exploit cross-currency arbitrage opportunities.
The most traded currency reported in the non-Japan APAC survey was the US dollar (52%, compared with 47% lastyear). Of the remainder, 32% was in APAC currencies, down from 48% in 2020, mainly due to fall in the share of Japanese
yen to 7% from 26% and a rise in the share of the euro to 15% from 5%. The share of Australian dollars was 17% (upfrom 15%), under 1% was Hong Kong dollars (from 2%), 2% was Singapore dollars (up from 1%) and 3% in Chinese
renminbi (up from 1%). The weight of business in the renminbi switched to the offshore from the onshore currency. The
share of cross-currency business fell to 8% from 16%.
The survey was a net cash borrower in Chinese renminbi, yen and minor APAC currencies but it switched to being a net
cash lender through cross-currency repos (64% were reverse repos, compared with 31% in 2020).
Figure 4 – Currency analysis

Chart 4

17%

JPY

7%

9%

USD
EUR
AUD

3%
13% 1%

other non-Asian currencies

APAC ex-Japan
Japan

15%

84%
52%

Asia-Pacific repo market survey

10Instrument analysis
63% of the outstanding value reported in the Japan survey was in gentan, unchanged from 2020. As noted last year,
this high share is surprising given the general shift in the Japanese market since 2018 towards the updated form of new
gensaki. Gensaki accounted for 30% of the latest survey (also unchanged) and international-style repurchase transactions(typically under the GMRA) were 8% (compared with 7%).
As last year, gentan provided net cash lending in 2021 (90% was reverse repo, compared with 94%), whereas gensaki
switched from net cash lending to net cash borrowing (73% in repo, down from 4% in 2020). Repurchase transactions
were primarily for net cash lending (67% in reverse repo, down from 100%).
Once again, no tri-party repos were reported, despite this type of transaction accounting for a significant share of the GC
repo market in Japan in the form of Subsequent Collateral Allocation Repo (SCAR). This discrepancy probably reflects
the international focus of the business of the survey sample which is likely to be securities rather than cash-driven andtherefore less likely to use GC and tri-party repos.
The primary type of repo reported in the non-Japan APAC survey continued to be repurchase transactions (94%,compared with 96% in 2020). Only 4% were documented buy/sell-backs (down sharply from 16%). Some 3% waspledged repo, which are domestic Chinese transactions, up from 1%.
11% of the outstanding value of the survey was tri-party repo (down from 20%).
Net cash lending and securities borrowing was focused through GMRA-style repurchase transactions and net cash
borrowing through the other types of repo.
Figure 5 – Instrument analysis - Japan				Chart 5

Instrument analysis - APAC ex-Japan

Chart ?

7%

3%

1%

repurchase transactions
Gensaki repo

repurcha

Gentan repo

30%

documenpledgedChart ?
3%

63%

30%

1%
96%

repurchase transactions

repurchase transactions

Gensaki repo

documented sell/buy-backs

Gentan repo

pledged repo96%

Asia-Pacific repo market survey

11Rate analysis
All the repo reported in the Japan survey continues to be fixed rate.
The share of fixed-rate repos in non-Japan APAC survey jumped to 97% from 80% in 2020, with floating-rate dropping
to 3% from 14%.

Chart
6 ex-Japan
Figure 6 – rate analysis- APAC3%

fixed-rate
floating-rate

97%

Maturity analysis
The survey measures the stock of business still outstanding on the survey date and not the flow of business over thepreceding year. This means short-term transactions are under-represented because most run off between survey dates.
They would represent a much higher share of turnover.
In the Japan survey, short-dated repo accounted for 61%, up from 56% in 2020. Transactions with a remaining maturityof one day accounted for 9% of outstanding value, 18% was for two to seven days and 34% for other short dates.
These shares compared with 15%, 17% and 23%, respectively, in June 2020, indicating a lengthening within short-dated
maturities. The overall maturity profile of the survey is more skewed to the longer term than the domestic market in Japan(where 38% of outstanding value in 2020 was for one-day).
A very substantial share of outstanding business continues to be in forward repos (27%, compared with 33% last year).
However, it is possible that some or much of the repos reported in the survey as forwards were actually for delayed
settlement dates of T+3 or T+4 and were not traded as forwards. Delayed settlement periods would reflect the challengesof cross-border settlement across several time zones.
Of the remaining outstanding business reported to the Japan survey, 10% had remaining maturities of between one andthree months (little changed from 11% last year). There was little business outstanding in Japan beyond three months,
none beyond one year and no open trades.
The survey sample in Japan were net cash borrowers in one-day repo (76% were repos, down from 82% in 2020) but net
cash lenders in longer-term and forward repos.
Some 47% of outstanding value reported in the non-Japan APAC survey was in short dates (down from 53% in theprevious survey), of which, 17% had more than one week but no more than one month remaining to maturity (comparedwith 28%). 13% was between one and six months, sharply down from 27% last year. Forward repos jumped to 22% from
10% and business beyond one year grew to 3% from 1%. Open repo was 15%, compared with 7% last year. There wastherefore an overall shift into open, long-term and forward repos.
Asia-Pacific repo market survey

12In 2020, the survey sample was a net cash borrower across most remaining maturities, particularly over one to six months(where 67% were reverse repos) and over one year, but a net cash lender over two to seven days, while short dates asa whole were in equilibrium. Broadly-speaking, the survey sample ran a positive maturity gap (borrowing long, lending
short). In the latest survey, the sample became a net cash borrower in short dates as a whole (55% of which was repo)
but a net cash lender between one and 12 months and in open and forward repo. In other words, the survey sample
switched to a negative gap.
Figure 7 – Maturity analysis

Chart 7
40%

Japan

35%

Apac ex-Japan
Europe

30%
25%
20%
15%
10%
5%
0%

1 day

2 to
7 days8 daysto 1M

over 1M
to 3M

over 3M
to 6M

over 6M
to 12M

over
12M

forwardopen

Asia-Pacific repo market survey

13Collateral analysis
The overwhelming share of the collateral reported in the Japan survey was again in domestic fixed-income securities(84%, compared with 86% last year), almost entirely JGBs. This is much lower than in the Bank of Japan statistics for thedomestic market (where JGBs account for almost 98%). A very small amount of Japanese non-government securities
were repoed by the survey sample.
The only other significant source of collateral in the Japan survey was US Treasuries, which grew to 10% from 6%.
Other US securities increased to 3% from 2%. Most of the remaining collateral was euro-denominated government
securities, which accounted for 2% (down from 3% in 2020).
The survey sample were net borrowers of JGBs (70% of outstanding transactions were reverse repo), US securities (58% ofTreasuries and 82% of other US securities were reversed in) and eurozone government securities (84% was reversed in).
In the non-Japan APAC survey, there were big changes in collateral composition. The share of APAC securities dropped
to 40% from 62% in 2020, reflecting a fall in the share of Japanese fixed-income securities (mainly JGBs) to 9% from
33%. The largest pool of collateral was in US Treasuries (21%, compared with 14%), eurozone government securities (upto 17% from virtually nothing in 2020) and Australian securities (unchanged at 16%). The share of issues by international
financial institutions was unchanged at to 6%, as were “other APAC” securities. US non-government securities increased
to 10% from 3% and eurobonds to 6% from 2%. Equity dropped to zero from 5%. The overall share of government
securities was 31%, compared with 30% in 2020.
Overall, the survey sample became a net borrower of government securities (62% were reverse repos, comparedwith 50%) and was a net lender only of securities issued in non-eurozone Europe and Japan and by non-government
borrowers in the US. 73% of transactions against eurozone securities and 60% against US Treasuries were reverse
repos. In 2020, the survey sample was a net borrower only of securities issued in Hong Kong or by international financial
institutions and eurobonds.
Figure 8 – Collateral analysis

Chart 84%

9%19%
APAC ex-Japan
Japan

10%
3%

3%

17%

Japan

European bonds

Australia

Other

US Treasuries
IFIs

3%

other APAC bonds
China

84%

10%

Other US bonds
21%

6%
5%

Singapore

6%

Asia-Pacific repo market survey

14

Contract analysis
90% of the legal agreements reported in the Japan survey were GMRAs, reflecting the cross-border nature of the survey
sample’s business. However, this statistic is at odds with the share of gentan repos, which are documented under a local
master agreement.
In the non-Japan APAC survey, the bulk of legal agreements continue to be GMRAs (94%, compared with 89% lastyear). There was little cross-border use of other agreements (compared with 11% in 2020). Some 6% were local masteragreements including the South Korean Gretai.
Figure 9 – Contract analysis Chart 9
1% 2%

APAC ex-Japan10%

local agreement

Japan

GMRA
other
90%

97%

Asia-Pacific repo market survey

15

What is a repo?
A repo is a sale of assets and a commitment by theseller to repurchase the same or similar assets inthe future at a different price. The most common
type of repo involves a sale of government securities
and a commitment to repurchase the same issue of
securities. The repurchase price is equal to the saleprice plus what is called ‘repo interest’. Should theseller fail to repurchase the assets at maturity, thebuyer is free to recover his cash by selling them, whichmeans that they act as collateral and reduce his credit
risk. The buyer also has the right to sell the assets at
any time during the repo (although he will need to buyback the assets from the market to return to the seller
at the maturity of the repo). The right to sell collateralat any time means that repo also reduces the buyer’s
liquidity risk.
The seller’s commitment to repurchase collateral meansthat he has only temporary use of the buyer’s cash,
while the buyer has only temporary use of the seller’s
assets. Therefore, despite its legal structure, a repo
behaves like a secured loan/deposit. However, unlike
a traditional secured loan/deposit, in which collateralis pledged, the transfer of legal title in a repo gives thebuyer (cash lender) stronger control over the collateralshould the seller become insolvent. This reduces his
credit risk further.

In China, there is a market in ‘pledged repo’. This isdifferent to a standard repo, which is based on title
transfer. If the seller in a pledged repo were to become
insolvent, it is uncertain whether the buyer could
immediately liquidate his collateral without interference
from the insolvency process. And the buyer has no rightto temporarily sell the collateral during the repo.
The repo market is essential to the functioning of aliquid secondary market in securities, as it is a cheap
and resilient source of funding for market-makers andother dealers. It can also be used to borrow securities
to settle short positions, including those acting ashedges, and to avoid settlement failures where an
outgoing delivery depends on an incoming delivery that
does not arrive on time. As a key source of funding
for long positions and securities borrowing for shortpositions, repo is vital to the hedging and pricing ofderivatives. The ability to go long of relatively cheapbonds and short of relatively expensive bonds also
helps to ensure an accurate yield curve for pricing andvaluing securities, including corporate bonds. A liquid
repo market also provides a safe short-term asset forrisk-averse non-bank investors. And it is the preferredvenue for open market operations by central banks.
Most repos in the international market are traded under
the Global Master Repurchase Agreement (GMRA)
published by ICMA.

Asia-Pacific repo market survey

16

ICMA Hong Kong
T: +852 2531 6592
Unit 3603, Tower 2,
Lippo Centre
89 Queensway
Admiralty
Hong Kong
apac@icmagroup.org
www.icmagroup.org
Asia Securities Industry & Financial Markets Association
Tel: +852 2531 6500
Unit 3603, Tower 2,
Lippo Centre
89 Queensway
Admiralty
Hong Kong
info@asifma.org
www.asifma.org

Asia-Pacific repo market survey

17