SEC to open repo market to nonbank financial firms

The Securities and Exchange Commission (SEC) is pushing to expand the government securities (GS) repurchase agreement (repo) market to further deepen the country’s capital market.

“The repo market is envisioned to support the market-making activities of government securities dealers in the country. Expanding this market provides us with another opportunity to improve liquidity, manage short-term funding, and boost overall market activity,” SEC Chairperson Emilio B. Aquino said in a media release on Tuesday.

This initiative aims to enhance liquidity and broaden market participation by allowing nonbank financial institutions to engage in repos, extending beyond GS-eligible dealers, the SEC said.

A repo is a short-term agreement where one party sells government securities and agrees to repurchase them at a later date, effectively serving as a secured loan.

The SEC assumed oversight of the market in 2020 and has since explored ways to diversify participation beyond GS-eligible dealers.

Last year, the Bangko Sentral ng Pilipinas and the Bankers Association of the Philippines proposed including fund managers and trust entities in the GS repo market to further develop the country’s capital markets.

The SEC has also collaborated with the Bankers Association of the Philippines and the Asian Development Bank to organize the Global Master Repurchase Agreement (GMRA) Workshop, which aims to equip stakeholders with the knowledge and tools needed to implement the GMRA framework, it said.

“To complement all these efforts, the SEC is also working to identify the most appropriate self-regulatory organization for the Philippine repo market to ensure its long-term viability,” the SEC added. — Ashley Erika O. Jose