A pilot survey of the
Asia-Pacific repo market
September 2017© International Capital Market Association (ICMA), Zurich,and ASIFMA, Hong Kong, 2017. All rights reserved.

Disclaimer
No part of this publication may be reproduced or transmitted in any form or by any means without permission
from ASIFMA and ICMA. This report is intended for general information only and is not intended to be nor
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advice. Users of this report should seek appropriate independent advice before entering into any kind of
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ASIFMA, ICMA nor the authors shall have any liability arising from or relating to the use of this report and its
contents.
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A pilot survey of the Asia-Pacific repo market September 2017

About ASIFMA and ICMA
Asia Securities Industry and Financial Markets (ASIFMA)ASIFMA is an independent, regional trade association with over 100-member firms comprising a diverse rangeof leading financial institutions from both the buy and sell side, including banks, asset managers, law firms andmarket 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, innovativeand competitive Asian capital markets that are necessary to support the region’s economic growth. We drive
consensus, advocate solutions and effect change around key issues through the collective strength and clarity
of one industry voice. Our many initiatives include consultations with regulators and exchanges, development of
uniform industry standards, advocacy for enhanced markets through policy papers, and lowering the cost of doing
business in the region. Through the GFMA alliance with SIFMA in the United States and AFME in Europe, ASIFMA
also provides insights on global best practices and standards to benefit the region.
More information about ASIFMA can be found at: www.asifma.org.
www.asifma.org

International Capital Market Association (ICMA)ICMA represents financial institutions active in the international capital market worldwide and has around 520
members located in over 60 countries. ICMA’s market conventions and standards have been the pillars of theinternational debt market for almost 50 years, providing the framework of rules governing market practice whichfacilitate the orderly functioning of the market. Since the early 1990’s, ICMA has played a significant role in promoting
the interests and activities of the international repo market, and of the product itself. The European Repo andCollateral 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

A pilot survey of the Asia-Pacific repo market September 20173

Contents
Methodology of the survey

5

New data about Asian repo in the European survey (December 2016)

6

Pilot survey results of the Asian survey

6

What is a repo?

14

4

A pilot survey of the Asia-Pacific repo market September 2017

ICMA’s European Repo and Collateral Council (ERCC) and ASIFMA’s Secured Funding Markets Committee havebeen co-operating to extend the ICMA’s semi-annual survey of the European repo market to the Asian market.
Phase One of the joint ICMA/ASIFMA initiative was to increase the granularity of the ICMA’s existing European survey
to measure Asia-Pacific repo executed on repo desks located in Europe. To this end, from June 2016, a number of
additional questions have been included in the European survey.
Phase Two of the initiative was to launch a pilot survey of the repo desks located in Asia-Pacific of a sample ofmainly global banks using a questionnaire based on that for the existing European survey. The aim was to uncover
any unexpected problems before widening the survey to other banks. The Asia-Pacific questionnaire was sent out
to ASIFMA and ICMA members active in the cross-border repo market on 7 December 2016, at the same time as
the ICMA survey in Europe. These preliminary results are based on responses from eight banks (compared to 65 inEurope). Although this was a narrow sample, the respondents are major market participants and the results seemto be representative of the Asian market, though this is not certain at this stage. Building on the lessons of the pilot
survey, it is planned to start an annual survey of the cross-border Asian repo market from December 2017 in parallelwith alternate semi-annual European surveys.

Methodology of the survey
The Asian survey follows the methodology of the European survey except for a more relaxed definition of repo (seebelow):• Asian repo has been defined, for the purposes of the survey, as repos (1) involving at least one party dealing froma location in Asia in any currency or against any collateral or (2) between parties located anywhere but in an Asiancurrency and/or against collateral issued in Asia.
• Respondents were asked to identify the location of repo desks executing transactions rather than the location
where the transactions were booked. This has been challenging for many banks.
• Repo has been defined to include instruments that do not conform to the standard definition of repo as an
instrument that transfers title to collateral, eg Chinese ‘pledged repo’ and Japanese ‘gentan’.
• The European and Asian surveys measure the value of repos and reverse repos outstanding at close of businesson the survey date rather than turnover over a period. This ‘snapshot’ of the market at one point in time understates
the volume of short-term transactions, given that many of these run off between survey dates, but provides ameaningful picture of exposures. Turnover over the six months up to the survey date was 17 times the outstanding
amount on 7 December 2016.
• 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 pilot survey of the Asia-Pacific repo market September 2017

5

New data about Asian repo in the European survey (December 2016)• Asian repo accounts for a small, although not insignificant share of the European market.
• The Japanese yen is the main Asian currency traded in the European repo market.
• The European market is a net cross-border taker of collateral from Asia.
• The most common Asian collateral traded in the European repo market is Japanese, of which two-thirds are JGBs.
APAC counterparties accounted for 3.9% of total outstanding repos and reverse repos reported by European
dealers (2.3% of repos and 5.6% of reverse repos), showing a net flow of collateral from Asia to Europe.
Asian currencies accounted for 5.3% of total outstanding repos and reverse repos traded in Europe. Japanese yen
accounted for 4.8%. Two-thirds of yen transactions were reverse repos, while two-thirds of other Asian currencytransactions were repos. In other words, European dealers were net lenders of yen and net borrowers of other Asiancurrencies.
The overall share of Asian collateral repo-ed out or reversed in by European dealers was 5.5%, of which, Japanesecollateral accounted for 4.3% and JGBs for 2.8%. Of the total collateral, 0.5% was collateral issued in other OECD
APAC countries; 0.4% was non-OECD APAC collateral; and 0.3% was APAC eurobonds.

Pilot survey results of the Asia-Pacific survey
Summary• The vast bulk of collateral was reversed in by repo desks located in Japan from counterparties in the domestic
market and mainly repo-ed out cross-border to counterparties outside Asia.
• Collateral in the form of sovereign securities formed a larger share of the Asian market than the European market(at least as measured in the surveys). The largest share of collateral was Japanese, but there was also a significant
amount of US collateral.
• The main currency traded in the Asia-Pacific repo market was Japanese yen, of which the reporting banks were
net lenders. There was some cross-currency repo between US dollars and Japanese collateral.
• Most transactions were executed directly on the telephone and electronic messaging systems. Voice-brokers
were heavily involved in reverse repos from domestic counterparties. There was very little electronic trading.
• The proportion of repos that was centrally cleared in Asia-Pacific was larger than in Europe but, in contrast, mostAsian repos seem to have been executed directly, then registered post trade.
• Tri-party repo was very small.
• While most repos were short-dated, there was significant business with a remaining term of between one andthree months, suggesting the trading of HQLA for regulatory purposes.
• Most Asia-Pacific repos took the form of repurchase transactions (classic repo) and were fixed-rate. There wasvery little floating-rate repo.

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A pilot survey of the Asia-Pacific repo market September 2017

Counterparty analysis• Most of the reporting banks in the survey were based in Japan. On the other hand, counterparties based in Japanaccounted for over 25% of total repos transacted by reporting banks and more than 96% of total reported reverse
repos. The imbalance is magnified by the fact that total reverse repos reported in the survey accounted for about
77% of combined repos plus reverse repos, a major difference from with the European survey, in which reported
repos and reverse repos are broadly equal in size. The main net takers of collateral from the reporting banks werecounterparties outside both Asia and Europe (including US-based counterparties), accounting for some 32% of
the total repos reported by the Asian banks but less than 1% of their total reverse repos. Europe-based banks
were less significant net takers of collateral, which is broadly consistent with the view from the European survey(which showed 2.3% of repos by Europe-based desks were with Asian counterparties but 5.6% of reverse repos).
Australia-based counterparties were also net collateral-takers. Other Asia-based counterparties (likely to be mainlyin Hong Kong and Singapore) were small net collateral-takers.

Counterparty Analysis
7.1%

3.9%

5.5%
1.9%

AU
JP
Other Asia
Europeex. Europe & Asia

81.6%

repo

reverse repo
1.9%
0.5%

16%

0.5%

0.8%

32.3%

25.4%

19.1%

7.1%

A pilot survey of the Asia-Pacific repo market September 2017

96.3%

7

Geographical analysis• The geographical and counterparty analyses are similar, except that the geographical analysis ask not for thelocation of the counterparty but the geographical relationship between seller and buyer, specifically, whether they
are in the same country or region. Unfortunately, as fewer banks responded to this section of the questionnaire,the two analyses do not match exactly, although they are consistent. The reporting banks were net collateral-takers
from domestic and, to a much lesser extent, other Asian counterparties (suggesting that net collateral-taking fromJapan-based counterparties shown in the counterparty analysis was largely by other Japan-based banks). Thus,
some 70% of total reverse repos by the reporting Asian banks were with domestic counterparties but only about
24% of total repos. Net collateral-giving was to Europe and other regions. Gross collateral-giving was much more
evenly distributed than gross collateral-taking. In the European survey, domestic transactions were relatively lessimportant, accounting for about 21% of total reported repos and 25% of reverse repos. European repo desks weresignificant net collateral-givers to non-eurozone counterparties (probably London-based investment banks) but net
collateral-takers from eurozone counterparties.

Geographical Analysis
6.3%
4.7%
Domestic
Cross-Border in Asia
Cross-Border in Europe

29.6%
59.4%

repo

Cross-Border elsewherereverse repo
1.5%

21.6%

1.8%

24%
26.7%

15.2%
70%
39.2%

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A pilot survey of the Asia-Pacific repo market September 2017

Trading analysis• Transactions were largely executed directly by phone or electronic messaging (about 78% of total transactions) but
a significant share of reverse repos were executed through voice-brokers (over 26%). Most of the voice-brokered
reverse repos were with domestic counterparties (assumed to be Japan-based). Electronic trading was very smalland entirely CCP-cleared reverse repo. In the European survey, electronic trading was much more important(almost 29%), which means that direct and voice-brokered transactions were less so (almost 61% and less than
11%, respectively).

Trading Analysis
1.1%
21.4%
DirectVoice-Brokered
Electronic

77.5%

repo

reverse repo

0%

1.4%

21.4%

26.3%

95.1%

A pilot survey of the Asia-Pacific repo market September 2017

72.3%

9

Collateral analysis• Almost 95% of total reported repos and some 89% of total reported reverse repos were either central government
or central bank securities (compared to 80% and 83%, respectively, of EU collateral in the European survey).
Japanese collateral accounted for 50% of total reported repos and 74% of total reported reverse repos, whichmeans that the reporting Asian banks were net takers of Japanese collateral. They were also net takers of most othercollateral but to a lesser extent. US collateral accounted for 21% of repos and 17% of reverse repos (compared
to about 11% in the European survey); Eurozone collateral 6% and 5%, respectively; Australian collateral 12% and
2%; and other Asian collateral 3% and 1%.

Collateral Analysis
7.1%

3.9%

5.5%
1.9%

AU
JP
Other Asia
Europeex. Europe & Asia

81.6%

repo

reverse repo
1.9%
0.5%

16%

0.5%

0.8%

32.3%

25.4%

19.1%

10

7.1%

96.3%

A pilot survey of the Asia-Pacific repo market September 2017

Currency analysis• Japanese yen accounted for 49% of total reported repos and 65% of total reported reverse repos. US dollars
accounted for 31% and 25%, and Australian dollars for 12% and 3%. Taken together with the collateral analysis(e.g. 74% of repos in Japanese collateral), this implies cross-currency reverse repo involving US dollar cash
against Japanese collateral may be about 10%, which is above the directly-reported cross-currency figure of about
5% (but this is consistent with the European survey where experience suggests that the directly-reported item isunderstated).

CurrencyAnalysis
0.5%

1.2%

4.9%
AUD

26.6%

JPY
EUR
USD
5.5%
Other Asian
61.3%

repo
1.7%

Other

reverse repo

2.3%

0.2%
11.6%

0.9%

3%

25.2%
31.3%

5.9%

4.1%

49%

A pilot survey of the Asia-Pacific repo market September 2017

64.9%

11

Infrastructure analysis• Some 35% of reported Asian repo business was cleared across a CCP (which is assumed to be the JSCC in
Japan). This compares with 29% in Europe. Given that under 2% of reported business was executed with a
CCP through electronic trading, most of the reported transactions with a CCP must have been executed directlyor via voice-brokers and registered post trade. In the European survey, some 7% of direct and voice-brokeredtransactions were registered with a CCP post trade. Less than 2% of Asian repo business was managed by atri-party agent (compared with 12% in Europe) and this was heavily skewed towards repo (as it is in the European
survey, although to a lesser extent).

Infrastructure Analysis

CCP-Cleared
34.8%
Uncleared

65.2%

repo

reverse repo

32%

68%

12

35.7%

64.3%

A pilot survey of the Asia-Pacific repo market September 2017

Maturity analysis
The Asian survey showed a higher proportion of short-dated repo among the reporting banks than in the European
survey (about 62% compared with 56%) and a much smaller share of forwards (under 2% compared with 10%).
Less than 1% of reported Asian business was beyond six months (compared to almost 4% in Europe). There wasnet cash borrowing through short dates (short-dated repos were 68% and reverse repos 59%). However, there wassignificant net cash lending from one to three months (8% of total reported reverse repos compared to over 37% of
total reported repos; and some 20% and 1%, respectively from three to six months). This probably reflects the needto borrow high-quality liquid assets (HQLA) to meet regulatory liquidity ratios.

Maturity Analysis
35%

30%

25%

20%

15%

10%

5%

0%
Open

1D

1D-1W

1W-1M

1M-3M

3M-6M

repo

6M+

Forwardreverse repo

25%

40%
35%

20%

30%
25%

15%

20%
10%

15%
10%

5%
0%

5%
Open

1D

1D-1W 1W-1M 1M-3M 3M-6M

6M+ Forward

A pilot survey of the Asia-Pacific repo market September 2017

0%

Open

1D

1D-1W 1W-1M 1M-3M 3M-6M

6M+ Forward

13

Instrument analysis• The bulk of reported transactions were repurchase transactions or classic repos (almost 97%) and were also fixed
rate (97%). There were very few floating-rate transactions (mainly repos). This may in part reflect the relative lackof suitable benchmarks. Open repos were about 3% of total reported transactions (mainly repos). In the European
survey, about 15% of transactions were sell/buy-backs, some 82% were fixed rate and over 6% were open.

What is a repo?
A repo is a sale of assets and a commitment by the seller to repurchase the same or similar assets in the future
at a different price. The most common type of repo involves a sale of government securities and a commitment torepurchase the same issue of securities. The repurchase price is equal to the sale price plus what is called ‘repo
interest’. Should the seller fail to repurchase the assets at maturity, the buyer is free to recover his cash by sellingthem, which means that they act as collateral and reduce his credit risk. The buyer also has the right to sell theassets at any time during the repo (although he will need to buy back the assets from the market to return to theseller at the maturity of the repo). The right to sell collateral at any time means that repo also reduces the buyer’s
liquidity risk.
The seller’s commitment to repurchase collateral means that 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 asecured loan/deposit. However, unlike a traditional secured loan/deposit, in which collateral is pledged, the transfer
of legal title in a repo gives the buyer (cash lender) stronger control over the collateral should the seller become
insolvent. This reduces his credit risk further.
In China, there is a market in ‘pledged repo’. This is different 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 right to temporarily sell thecollateral during the repo.
The repo market is essential to the functioning of a liquid secondary market in securities, as it is a cheap andresilient source of funding for market-makers and other dealers. It can also be used to borrow securities to settle
short positions, including those acting as hedges, 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 andsecurities borrowing for short positions, repo is vital to the hedging and pricing of derivatives. The ability to go longof relatively cheap bonds and short of relatively expensive bonds also helps to ensure an accurate yield curve for
pricing and valuing securities, including corporate bonds. A liquid repo market also provides a safe short-term asset
for risk-averse non-bank investors. And it is the preferred venue for open market operations by central banks.
Most repo in the international market is traded under the Global Master Repurchase Agreement (GMRA) publishedby ICMA and SIFMA.

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A pilot survey of the Asia-Pacific repo market September 2017

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