As the repo market faces an uncertain future, the author looks at the ramifications of increased regulation and liquidity demands.The European repo market is in transformation. A combination of Basel III capital and liquidity requirements, monetary policy, and regulatory initiatives is driving this shift.The leverage and supplementary leverage ratios have increased the cost of holding repos to the point where netting (or matched-book trading) is necessary to remain profitable. Accordingly, banks’ provision of repo pricing and liquidity has become a value-added service for clients, subsidised by profitable businesses. The concern is that the reduced effectiveness of the European repo market will have repercussions for capital markets and the real economy […]