An Introduction to Repo Markets, Third Edition

PREFACE TO THE FIRST EDITION

The repo market is an important component of the global capital and money markets. The first repo transactions were initiated by the US Federal Reserve over eighty years ago, since which time repo has become the main instrument of open market operations for many major central banks around the world. The market has grown substantially in the last ten years and is now estimated to account for up to 50% of daily settlement activity in non-US government bonds world-wide; this is a phenomenal figure. Daily outstanding volume in international repo transactions is approximately £420 billion.

The rapid growth in the use of repo world-wide has been attributed to several factors including the rise in non-bank funding and disintermediation, the expansion of public debt, the liquidity of the instrument itself and the generally high quality of collateral used. Its flexibility has resulted in repo being taken up by a wide variety of market players, from securities houses and investment banks to fund managers, corporate treasurers and local authorities. Virtually all major currency markets in the world now have an established repo market; the facility is also increasingly used in developing currency markets as well. Trading so-called ‘emerging markets’ repo brings with it specific risks and requirements and these are examined in a separate section.

This book is aimed at those with little or no previous understanding of or exposure to the repo markets; however it ...