Stockholm, October 7, 2010 - NASDAQ OMX (NASDAQ:NDAQ) announces that it has launched a clearing service for the repo market together with market participants. As a result of an agreement between the Swedish Money Market Council and NASDAQ OMX, the entire Swedish Interbank repo market will ultimately be cleared through NASDAQ OMX Stockholm AB.
Previously, SEK denominated repos, a market with an average total daily turnover of more than 100 billion SEK (~USD14 bn), have been traded and settled bilaterally. The introduction of a central counterparty reduces counterparty risk and increases transparency, thereby improving financial stability. In addition, clearing will increase liquidity on the Swedish repo market and the underlying bond market, as market participants benefit from positive effects from reduced credit exposures as well as netting.
"The agreement with the Money Market Council changes the structure of the Swedish repo market and will make central clearing an industry standard for the Swedish repo market. This is an important step in the expansion of our clearing house offering to further OTC products" says Erik Thedéen, Head of Nordic Fixed Income and President NASDAQ OMX Stockholm.
"The introduction of central clearing in the Swedish repo market is a milestone when it comes to improving the Swedish bond market. Central counterparty clearing will limit counterparty risk and further increase the attractiveness of the Swedish Fixed Income markets", stated Tomas Hedberg, Chairman of the Swedish Money and Bond Market Council and Head of FX & Fixed Income at Swedbank.
The first interbank repo transactions have now been successfully registered for clearing and settled accordingly. The service will, via our members, also be available for end-customers such as asset managers and corporate treasury departments.
A repurchase agreement, or a repo, is a single agreement to sell a security on a start date and buy it back again from the same counterparty on the end date at an agreed price. The same agreement is a reversed repo for the buyer. In simple terms, repos are borrowing/lending of cash with securities transferred as collateral during the borrowing/lending period.
The repo market provides banks and other market participants a possibility to secure short term funding at the same time as the market is offering investment alternatives for asset managers. The existence of an efficient repo market supports the efficiency of the underlying bond market and in the long run ensures efficient pricing in the bond market, as bond market makers often rely on the repo market to cover the settlement of a bond.
About NASDAQ OMX
The NASDAQ OMX Group, Inc. is the world's largest exchange company. It delivers trading, exchange technology and public company services across six continents, with approximately 3,600 listed companies. NASDAQ OMX offers multiple capital raising solutions to companies around the globe, including its U.S. listings market, NASDAQ OMX Nordic, NASDAQ OMX Baltic, NASDAQ OMX First North, and the U.S. 144A sector. The company offers trading across multiple asset classes including equities, derivatives, debt, commodities, structured products and exchange-traded funds. NASDAQ OMX technology supports the operations of over 70 exchanges, clearing organizations and central securities depositories in more than 50 countries. NASDAQ OMX Nordic and NASDAQ OMX Baltic are not legal entities but describe the common offering from NASDAQ OMX exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. For more information about NASDAQ OMX, visit http://www.nasdaqomx.com.