Repurchase agreements (repos) will be the backbone of the new order after European economic and monetary union (Emu). The implications for the debt repo and securities lending markets in Europe are profound. There will be less impact on the nascent equity repo and securities lending markets, those are driven by the search for higher returns.
John Langton, chief executive of the International Securities Market Association (Isma) is bullish about the future of the debt repo market in Europe. "Cedel and Euroclear reckon that half their combined [annual] turnover of $53 to $54 trillion - that's 12 zeros - is repo business. That's half a trillion dollars or so a week," he says. "It's going to be one of the major arms of operating monetary policy in the EU, so it just has to grow and grow."
An established international repo market already exists in London, and it will grow with monetary union....
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