BrokerTec and MTS launch RepoFunds Rate daily repo index

  • New daily repo index series tracking sovereign bonds of three eurozone countries
  • Indices to be calculated with one-day repo transactions
  • Developed in response to market interest and demand
  • Overall daily transaction volumes in sovereign repos in excess of €300 billion (single count)

London, 13th December 2012 – BrokerTec, ICAP’s global electronic fixed income trading platform, and MTS, a leading fixed income electronic trading venue in Europe that is majority-owned by London Stock Exchange Group, announces the launch of the RepoFunds Rate daily repo index for eurozone sovereign bonds.
RepoFunds Rate, the first index to reflect the effective cost of secured funding in key eurozone countries, was developed in consultation with the repo community and dealers from major financial institutions, and will initially cover Germany, France and Italy.

RepoFunds Rate is based on centrally cleared, electronically executed one business day repo transactions rather than indicative quotes. These are based on a common settlement date and will include all Overnight, Tom-Next and Spot-Next trades in both General Collateral (GC) and filtered specifics in order to more accurately reflect the effective cost of Repo funding for trades executed on both BrokerTec and MTS as regulated platforms or Multilateral Trading Facilities (MTFs).

Initially, all index data will be sourced from the BrokerTec and MTS electronic trading platforms, which together account for more than €250 billion of eurozone sovereign bond repos each day (single count). It will be distributed free of charge to customers via third parties, including Reuters (REPOFUNDS) and Bloomberg (REPF) as well as being available via e-mail and FTP sources.
The new indices, which will be published at the end of each business day, were developed in response to industry interest and demand, recognising the growing importance of secured funding and will offer dealers and investors confidence in benchmarking products and trades against the indices.

RepoFunds Rate data, including historical analysis, is publicly available on the new website at www.repofundsrate.com, which also launches today. Full details of the calculation methodology are available on the website.

Commenting on the launch of RepoFunds Rate, Bassma Elamir Riley, Head of Government Bond Repo, Deutsche Bank AG London, said: “RepoFunds Rate brings much needed transparency to the market. The inclusion of filtered specific transaction data, in addition to GC, sets the index apart from anything else currently available. The index will ultimately provide the trading community with a more efficient repo hedging tool, while simultaneously recognising the increasing role of collateral pricing in the OTC world.”

Romain Dumas, Managing Director of EMEA short term government products at Credit Suisse, said: “RepoFunds Rate should accurately reflect the cost of funding for the various types of collateral being used. As each trade will be centrally cleared, the counterparty dimension is removed to leave a purer measure of the secured interest rate, as essentially driven by the underlying collateral. Importantly, it will be broad based to provide a full, undisturbed measure of the market as it will incorporate both the trades labelled as GC and the transactions on specific bonds categorised as GC via an objective and transparent filtering process.”

David Garcia, Head of European Government Repo, J.P. Morgan, said: "The robustness of the RFR index lies in the large pool of executed transactions used in the calculation process. The fact that these transactions are cleared via a central counterparty extracts the credit component, making the underlying data comparable. It will provide investors with an accurate representation of actual funding levels, allowing them to use RFR swaps as a natural hedge for Repo holdings, shorter dated government bonds and eventually even longer dated assets."

Oliver Clark, Money Market Product Manager at MTS, said: “At a time when uncertainty is a defining element of the Eurozone sovereign bond world RepoFunds Rate delivers the high levels of transparency participants need to restore confidence in benchmarking and managing products referenced to the indices. These indices are built on significant volumes of real trade data executed by a diverse range of pan-European counterparties on electronic platforms. The real trade data used to calculate the indices is based on cleared trades, not bilateral trades and is therefore solid reliable and robust. The fast time to market for the indices, from inception to launch, is testament to what can be achieved when the industry works together.”

John Edwards, Director of Fixed Income (EMEA), BrokerTec, said: “The launch of RepoFunds Rate marks an important milestone for the European repo markets. The transparent calculation of the index, whose methodology has been accepted by the dealers and the wider market, reflects the effective cost of funding in eurozone markets.

“This is a first step in making indices publicly available and we look forward to developing further products, such as derivatives, as RepoFunds Rate continues to gain traction.”

 

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For further information please contact:

MTS:

Media Relations:
Lucie Holloway
+ 44 (0) 20 7797 1222
newsroom@londonstockexchange.com

About MTS:
MTS is Europe’s premier facilitator for the electronic fixed income trading market, with over 500 unique counterparties and average daily volumes exceeding EUR 85 billion. MTS customers benefit from its relationship with Europe’s leading diversified exchange business, the London Stock Exchange Group, which operates the largest and most liquid equity marketplace in Europe.
MTS markets provide the professional trading environment for the interdealer marketplace, enabling primary dealers from across the globe to access unparalleled liquidity, transparency and coverage.

The MTS Repo platform delivers an order driven market for the electronic transaction of repo agreements and buy/sellbacks. ACM is an electronic auction-trading platform that uses the MTS Repo technology to enable cash-rich investors to enter into secured money market investments via the tri-party repo mechanism.

MTS further facilitates the dealer-to-client bond market through BondVision, the most trusted and efficient electronic bond trading market, delivering exceptional access for institutional investors direct to the market makers, while MTS Credit delivers an electronic market for a wide range of euro-denominated non-government bonds.

MTS Data is sourced directly and exclusively from the MTS interdealer market and includes benchmark real-time data, reference data, reference prices, time series data and snap-shot data, providing the benchmark data source on the fixed income market.

MTS Indices provide the first independent, transparent, real-time and tradable eurozone fixed income indices, based on tradable prices from MTS. MTS indices are tracked by (and can be traded via) 30 ETFs in addition to numerous structured products.

www.mtsmarkets.com

About London Stock Exchange Group:
London Stock Exchange Group (LSE.L) sits at the heart of the world’s financial community. The Group operates a broad range of international equity, bond and derivatives markets, including London Stock Exchange; Borsa Italiana; MTS, Europe's leading fixed income market; and Turquoise, offering UK and Russian derivatives trading, pan-European and US lit and dark equity trading. Through its markets, the Group offers international business unrivalled access to Europe’s capital markets.

The Group is a leading developer of high performance trading platforms and capital markets software and also offers its customers around the world access and an extensive range of real-time and reference data products and market-leading post-trade services. The Group is also home to a world leading index provider FTSE, which creates and manages over 200,000 equity, bond and alternative asset class indices.

Headquartered in London, United Kingdom with significant operations in Italy and Sri Lanka, the Group employs around 1,900 people.
Further information on London Stock Exchange Group can be found at www.londonstockexchangegroup.com