Bond repo transactions started in April 1996 as the market for “bond lending/borrowing transactions with cash collateral”. This market has been primarily for JGBs and has consisted of a wide range of financial institutions, such as those who participate in the JGB cash market, those who seek funding for their portfolios, and those who seek JGBs as collateral for various financial transactions.
Within bond repo transactions, general collateral (GC) repo transactions are those where individual securities are not specified and transactions are primarily for fund transactions. On the other hand, transactions in which bonds are specified are called special collateral (SC) repo transactions. GC repo transactions are closely related to the call market and other money markets, whereas SC repo transactions are closely related to the cash bond market. Following its establishment in 1996, the bond repo market has expanded steadily, and in 2017 the market balance for bond lending/borrowing transactions with cash collateral reached the 100 trillion yen mark, while the market balance for repo transactions was running at about 30 trillion yen. (Source: “Bond Lending Balance” and “Balance of Corporate Bond Trading with Conditions (Repo) by Investor Type”, Japan Securities Dealers Association)
The market infrastructure has developed in line with the growth in the market, such as enhanced risk management through T+2 settlement and margin calls, and market practices including RTGS settlement have been unified. Furthermore, recently unification toward the global standard of “new repo transactions” is progressing. In addition, as part of innovation in securities settlement systems (migration to DVP, RTGS, and STP, etc.), the market as a whole is addressing the issues of establishing and reviewing fail practices as well as strengthening risk management by promoting the use of clearing organizations and shortening settlement intervals for JGBs (migration to T+1 settlement occurred in May 2018).
In response to such market changes, Ueda Yagi Tanshi began providing an electronic trading platform (UYRS) for bond repos in July 2015. We will strengthen our team and aim for further growth in bond repo transactions so that we earn and expand our reputation among our clients as a highly rated intermediary.