GSF: hair-cutting remarks
22 January 2014 Luxembourg
Image: Shutterstock
Bilateral business is attracting repo participants because central counterparty (CCP) haircut policies are too onerous, said a panel of experts at the 18th Global Securities 麻豆影视传媒 Summit in Luxembourg.
Seemingly in support of this, a survey revealed that more than 90 percent of conference attendees believe that CCP costs are prohibitive to business.
鈥淲e鈥檝e seen haircuts of 100 percent applied to buyers and sellers, which was more than the value of the asset being traded,鈥� highlighted Sylvain Bojic of Soci茅t茅 G茅n茅rale, who added that as CCPs are privately owned, 鈥渢hey鈥檙e not providing a public service鈥�.
Commerzbank鈥檚 Michael Lassmann described CCP costs as 鈥渉aircuts of the sovereign debt crisis鈥�, suggesting that they could come down in the future.
Repo transactions moving away from CCPs to the bilateral market shows that haircuts are too onerous, said Romain Dumas, managing director in Credit Suisse鈥檚 fixed income department. He is also in charge of the government repo desk.
But Dumas added: 鈥淭he evolution will be it is possible for these haircuts to go down.鈥�
He concluded that short-term repo business may be more suitable for a CCP, while long-term business should be conducted bilaterally.
Seemingly in support of this, a survey revealed that more than 90 percent of conference attendees believe that CCP costs are prohibitive to business.
鈥淲e鈥檝e seen haircuts of 100 percent applied to buyers and sellers, which was more than the value of the asset being traded,鈥� highlighted Sylvain Bojic of Soci茅t茅 G茅n茅rale, who added that as CCPs are privately owned, 鈥渢hey鈥檙e not providing a public service鈥�.
Commerzbank鈥檚 Michael Lassmann described CCP costs as 鈥渉aircuts of the sovereign debt crisis鈥�, suggesting that they could come down in the future.
Repo transactions moving away from CCPs to the bilateral market shows that haircuts are too onerous, said Romain Dumas, managing director in Credit Suisse鈥檚 fixed income department. He is also in charge of the government repo desk.
But Dumas added: 鈥淭he evolution will be it is possible for these haircuts to go down.鈥�
He concluded that short-term repo business may be more suitable for a CCP, while long-term business should be conducted bilaterally.
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