Repo Markets Across the Atlantic: Similar but Unalike

42 Pages Posted: 6 May 2018 Last revised: 30 Aug 2018

See all articles by Songjiwen Wu

Songjiwen Wu

Heidelberg University

Hossein Nabilou

Universite du Luxembourg - Faculty of Law, Economics and Finance

Date Written: April 19, 2018

Abstract

This paper sketches the key differences in the EU and the U.S. repo markets to inform the policy recommendations for harmonization and standardization of rules governing repo contracts put forward by the international financial fora and standard setters. In so doing, it examines three main aspects of the repo markets. First, it highlights the differences in the legal framework governing repo markets, such as legal construction of repo contracts, special insolvency treatment, and legal treatment of the reuse of collateral. Second, it discusses the composition, structure, and organization of the repo markets, such as differences in the composition of repo participants, the maturity of repos and the composition of the underlying collateral in repo contracts. Finally, it investigates the differences in the issues related to the market infrastructure of repo markets such as differences in the clearing and collateral management stages. The main finding of this paper is that in spite of significant efforts to standardize and harmonize repo markets as well as their applicable legal framework in the past, there remains significant differences across the Atlantic. Such differences in the legal framework, composition, structure, and organization of repo markets and repo markets infrastructure would require differential and more nuanced approach to regulating repo markets than what is pursued by the current international financial standard setters.

Keywords: Repurchase Agreement (Repo), Tri-Party Repo, Central Counterparty Clearing (CCP), Dodd-Frank Act, European Market Infrastructure Regulation (EMIR), Securities Financing Transactions and Reuse Regulation (SFTR)

JEL Classification: F3, G1, G2, G3, K2, N2

Suggested Citation

Wu, Songjiwen and Nabilou, Hossein, Repo Markets Across the Atlantic: Similar but Unalike (April 19, 2018). European Business Law Review, Vol. forthcoming. Available at SSRN: https://ssrn.com/abstract=3165720 or http://dx.doi.org/10.2139/ssrn.3165720

Songjiwen Wu (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Hossein Nabilou

Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )

4 Rue Alphonse Weicker
Office: B203
Luxembourg, L-2721
Luxembourg
+352 46 66 44 5450 (Phone)
+352 46 66 44 35450 (Fax)

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