The repo market sits at the heart of the global financial system, yet its efficiency rarely makes headlines outside specialist circles. As a mechanism for short-term borrowing and lending collateralised by fixed income securities, it underpins liquidity across bond markets, funds dealer inventories, and enables central banks to implement monetary policy. Improvements in how repo markets function could therefore ripple outward in ways that significantly reshape the broader fixed income trading environment.
Matt Gierke, global head of BrokerTec, the CME’s fixed income and FX trading business, says, “Repo is the oil in engine of the fixed income market and is tied directly to positioning in the cash market. We’ve increasingly been helping clients connect the two, both at the execution and clearing layers.”
At its most basic level, the repo market allows institutions to monetise their bond holdings overnight or for short periods by selling securities with an agreement to repurchase them at a slightly higher price. The difference represents the interest cost, the repo rate. For bond market participants, access to efficient repo is not optional; it fuels trading desks. Dealers use it to finance the inventory they must hold to make markets. Asset managers use it to manage cash positions. Hedge funds use it to leverage their fixed income strategies. When repo works well, these activities are cheap and frictionless. When it seizes up, as it did memorably in September 2019 when US repo rates spiked to 10%, the consequences spread rapidly through credit and rates markets.
Newer technologies are increasingly able to support more efficient – faster and more reliable – repo transactions.
“Repo used to be the less glamorous side of the business, often segregated from the wider fixed income market, housed behind walls and treated as a back-office utility,” says Sara Carter, global head of repo at BrokerTec. “Today, those physical barriers are down and the wider market’s understanding has increased, helped by more sophisticated execution technology, while some operational challenges have eased. As a result, we’ve seen a broader interest, focus, and appreciation of repo in the wider market. Combined with the acceleration of technology, this has enabled better balance sheet and risk management. Now, utilisation of repo within the wider financial markets is increasingly accessible.”
Technically better
Distributed ledger technologies are one way in which market operators and infrastructure providers are able to improve repo market functionality. Technology provider, Broadridge, has seen its distributed ledger repo (DLR) process US$368 billion a day in April 2026, totalling US$8 trillion for the month, a rise of 268% year on year, which gives an idea of the scale of repo trading and appetite for DLT-based processing.
“We were able to see frictions in the market and with the introduction of our blockchain-enabled, distributed ledger repo platform, we instituted more efficient processing for clients and enabled them to use their wider ecosystems more efficiently, and as a result, save on costs and resources,” says Paul Chiappetta, managing director, capital markets at Broadridge. “By helping clients within their own four walls, creating efficiencies on intracompany repo and helping structural processes like sponsored repo for FICC clearing, and now the new Agent Clearing Member model, has been hugely successful.”
He continues, “As that network has grown out, we’re looking at more ambitious use cases where we can help a client, not only on an intracompany basis, but from a markets perspective. We have a structure that allows us to mobilise collateral, on-ramp it into a custody structure that has all the appropriate possession and control rules that you’d expect, and because it is on the ledger it really achieves velocity at scale. That allows us to bridge some of the inefficiencies in today’s security settlement and repo market.”
Carter sees the shift in processing technology as part of a necessary sequencing. “Optimising legacy execution is a necessary precursor. Doing so frees up the operational capacity for participants to adopt more innovative, long-term solutions. Ultimately, the electronification of the existing model will have to run in parallel with developments in distributed ledger technology.”
Yama Darriet, head of OTC and repo expansion, at exchange and clearing operator Euronext, notes that collateral management has become one of the most important sources of costs for banks and consequently also one of the greatest opportunities for optimisation.
“Collateral management has become a strategic, bank-wide consideration, extending well beyond the operational mechanics behind the trade,” he says. “Clients want collateral to be allocated in the most efficient way possible, all the more in a context where liquidity is still an issue, and hence collateral needs to be managed in the most efficient way as possible.”
Yet it is not just a sell-side issue. Buy-side firms such as hedge funds, pension funds, asset managers and insurance companies are driving growth, notably to dealer-to-client venues that offer clearing access.
Darriet says, “Clearing houses, such as Euronext Clearing, are now building sponsored access models that extend direct CCP participation to buy-side firms. This brings clients netting benefits and capital efficiencies that bilateral repo simply cannot match at scale. This is particularly relevant as balance sheet constraints have been intensifying for banks, which limits their ability to provide the liquidity services that end clients need.”
For buy-side participants, the demand for better access goes further. Anja Kleefsman, head of treasury and liquidity management at PGGM Investments, says: “Transparency, insights into the depth of liquidity and access to the interdealer central limit order book instead of only the RFQ function would help us to optimise the size of cash buffers and to be better prepared for times of market stress. Transparency would also help in best execution.”
Central clearing is perhaps the most discussed structural reform in this context. In the US, the Securities and Exchange Commission has mandated broader central clearing of Treasury repo, a change that is working its way through implementation. The argument in favour is compelling: central clearing reduces counterparty risk, improves netting efficiency, and could bring a wider range of participants — including buy-side firms — into the repo market as direct counterparties rather than intermediaries. A more diverse participant base should in theory improve the resilience and depth of the market, smoothing out the kind of year-end and quarter-end dislocations that have periodically caused repo rates to spike and bond market liquidity to thin.
Carter captures the direction of travel: “Participants naturally gravitate toward efficient execution. With mandated clearing in the US and central counterparties streamlining risk, the crucial element is still simply moving the underlying collateral through the marketplace. If the industry can get that right using centralised ledgers and digital assets, we can move much faster toward a fully automated all-to-all marketplace.”
Material differences
One of the most consequential ways a more efficient repo market could affect fixed income trading is through tighter bid-offer spreads in the underlying bond markets. Dealers have historically been the central liquidity providers in fixed income, and their capacity to quote tight prices depends directly on their ability to finance positions cheaply and reliably. If improved repo market infrastructure — whether through greater use of central clearing, more standardised documentation, or better netting arrangements — reduces the cost and capital burden of running a repo book, dealers could in theory pass some of that benefit on through more competitive pricing. For investors, even marginal improvements in transaction costs compound significantly over time and across large portfolios.
“You have to look at how regulatory requirements — whether G-SIB, NSFR, or the leverage ratio — affect a bank’s balance sheet,” says Gierke. “The industry is moving away from simply executing funding requirements as needed. Instead, firms are asking what the most efficient collateral is and whether they should hold back to optimise the use of collateral for differing regulatory requirements. This allows banks to increase balance sheet efficiency and reduce or increase exposures where required to manage dynamic regulatory constraints, thus managing scenarios that impact their business.”
The tokenisation of collateral assets opens an additional dimension. Emilio Anting, digital strategy & wealth management of Franklin Templeton, describes how the firm’s on-chain money market fund, Benji, is already demonstrating what becomes possible when the underlying asset lives natively on a public blockchain.
“If I have a collateral call at 3am, I can send you the asset at 3am. You are the owner of the asset. We don’t need to wait for the transfer agency to do the whole reconciliation of the books and records.”
The economics of holding collateral are also transformed. “We’ve cut up the yield clock to the second,” Anting says. “If I hold the asset for four hours, I will get four hours of yield. If I send it to you at three in the morning, and you become the owner of the asset, and you hold it for six hours, you will get six hours of yield.” The implications for market-maker behaviour are direct: “If I’m a market maker and I’m getting four hours of yield with these big amounts, does that make my bid-offer now a bit tighter, because I have the economics? It’s not just a bid-offer, but it’s the yield that I’m getting by holding this collateral. It changes the economics.”
Greater efficiency in repo could also have significant implications for the functioning of the yield curve. When repo markets are fragmented or expensive for specific securities, those bonds can trade “special” — meaning they command a premium because they are in high demand as collateral. While this specialness is a natural feature of any market, excessive fragmentation creates distortions that make it harder for investors to assess fair value across the curve. A more liquid and transparent repo market, with better price discovery and fewer bottlenecks in collateral circulation, would reduce these distortions and allow bond prices to more accurately reflect underlying credit and duration risk rather than collateral scarcity.
Anting says, “You’ve taken having to over-collateralise, maximising your balance sheet, and made that more efficient by putting that on blockchain. That unlocks a layer of liquidity already. So now I’m willing to take more risk in my trades. Now, being able to maximise balance sheet, I have an asset that sweats 24/7. I can move it from venue to venue, asset to asset, 24/7. Removing the friction — and then unlocking the efficiency of collateral in real time.”
The implications for electronic trading are also worth considering. Fixed income markets have been on a steady, if uneven, journey toward greater electronification over the past decade. Repo has lagged behind outright bond trading in this respect, with voice and bilateral arrangements still dominant in many segments. Greater standardisation and the adoption of common protocols — facilitated by initiatives around digital collateral registries or distributed ledger-based settlement — could accelerate the automation of repo transactions. As repo becomes more systematically tradeable, the data it generates becomes more valuable: real-time repo rates across tenors and collateral types would give fixed income traders a richer picture of funding conditions and allow more sophisticated basis trading between cash bonds, futures, and derivatives.
There is also a macroeconomic dimension. Central banks rely on well-functioning repo markets to transmit monetary policy effectively. When the Federal Reserve adjusts the federal funds rate or the Bank of England changes Bank Rate, the expectation is that this feeds through into short-term funding costs and from there into broader financial conditions. A more efficient repo market shortens and strengthens that transmission chain, meaning that rate decisions reach the real economy more reliably. For fixed income investors, this has practical implications for how they model the relationship between central bank policy and the short end of the yield curve.
What needs to happen next
The building blocks are in place but the infrastructure still needs to knit together. Chiappetta points to the progress already being made at the intraday level.
“We’ve got 12 clients on board, and a deep pipeline into large institutional global firms,” he says. “We’re working very quickly to develop that intraday repo market by offering the ability for dealers on platform to purchase liquidity on an intraday basis. This helps them with intraday liquidity management that not only reduces agent fees and costs but also real balance sheet optimisation gives them capital relief.”
Interoperability between platforms remains an open question. Multiple blockchains, settlement systems, and clearing infrastructures are being built simultaneously, and their ability to communicate with each other will determine how far efficiency gains can spread.
“I don’t think it’s there yet,” says Anting. “People are still figuring out what’s going to be the standard. Are we taking bets? Yes. But do we know who will be the winner? No.”
None of this is to suggest that efficiency reforms are without complications. Broader central clearing raises questions about who bears the costs of margin and default fund contributions. Increased automation may concentrate activity in ways that create new systemic vulnerabilities. But the direction of travel is clear: a repo market that works better for more participants, with greater transparency and lower friction, would make the wider fixed income trading environment more liquid, more fairly priced, and more resilient to stress.
As Anting puts it: “The way we know it today is not going to be like that in the next five years. All of this is going to change.”
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