RDP 2018-09: Identifying Repo Market Microstructure from Securities Transactions Data 6. Conclusion

This paper provides an algorithm for extracting loan-level repo data from securities transactions data and uses the algorithm for a preliminary loan-level analysis of the Australian repo market. Related algorithms are commonly used for loan-level analysis of unsecured interbank markets around the world. Yet, until now, there has been little access to loan-level data on repo markets.

Assessment of the algorithm indicates that around 97 per cent of the detected loans are actual repos. The algorithm data detect a smaller market than reported in prudential data, likely in part reflecting repos with offshore entities that are reported to the prudential regulator but do not appear in the transactions data. Correlations between the two datasets are around 0.5.

I also provide the first analysis of the Australian repo market microstructure, covering several two-month samples between 2006 and 2015. Over these years the market size grew, the distribution of interest rates drifted up and tightened, and there was a shift towards shorter maturities. Interest rates tend to depend on loan size and the types of counterparties, but not maturity. In 2015, turnover is skewed towards a highly active pair, and the market network structure is split between a tightly integrated core and a segmented periphery that each deal with only one or two counterparties. Repo haircuts do not display obvious patterns, appearing randomly distributed around zero.