Changes in repo markets and the necessity for CCPs in Korea

2.1 Structure of repo markets

A repo transaction is a typical short-term funding contract in which a repo seller sells collateralized securities to a repo buyer and promises in advance to repurchase the sold securities at the agreed maturity. Repo transactions can be categorized according to how the collateral is specified, who manages the collateral and the liquidation process.

First, repo transactions are divided into general collateral (GC) repo and special collateral (SC) repo, depending on how the collateral is specified. In a GC repo, the parties agree on the terms of the eligible collateral, allowing the repo seller (borrower) to pledge any security within the terms. SC repo, on the other hand, is a repo transaction for specific securities that the repo buyer wants. Second, repo transactions are categorized into tri-party repo and bilateral repo, depending on the collateral management method. In bilateral repo, the counterparty directly underwrites the collateral and manages the haircut, while in tri-party repo, a third-party collateral management organization other than the counterparty is responsible for the settlement and collateral management of the repo transaction. Third, repo transactions are divided into non-centrally cleared repo and CCP cleared repo according to the clearing method between the repo buyer and seller. In the latter case, the contract between the buyer and seller is replaced by a contract between the seller and the CCP, and the buyer and the CCP, with the CCP becoming the legal counterparty to the original contractors, thus isolating counterparty risk.

Repo transactions are primarily over-the-counter and marketed by dealers. In the US, government securities primary dealers (PDs) act as repo dealers, and in Europe, large banks that participate in capital markets through universal banking act as dealers [8]. Dealers make markets between borrowers and lenders of funds. In general, money lenders (buyers) include money market funds (MMFs), pension funds, insurance companies and general corporations that need to manage cash, while money borrowers (sellers) include hedge funds, asset management companies and small and medium-sized financial companies that have difficulty borrowing funds independently. In addition, commercial banks become participants in the repo market in both directions, both for procuring reserves and for short-term liquidity investment.

In repo markets, dealers monetize through collateral haircuts, repo rate differentials and maturity transformation. Maturity transformation means that dealers raise funds through overnight repos with MMFs and supply funds to hedge funds and asset management companies through term repos. The GFC served as an important example of how a liquidity/maturity transformation can be transmitted when short-term repo borrowing is disrupted (Stein, 2013).

2.2 Features of the US and European repo markets

The US and Europe have the most active repo markets, which play an important role in the short-term financing and operations of securities firms (investment banks). However, there are differences between the US and Europe, such as the use of CCPs and collateral utilization systems (Baklanova et al., 2017; Boissel et al., 2018). First, let us take a look at repo transactions in the US. Baek (2017) categorizes the repo market in the US as shown in Figure 1.

“Tri-party repo” in sector 1 of Figure 1 is a market where repo dealers, mainly large securities firms, raise funds from money lenders such as MMFs. In the tri-party market, a clearing bank performs settlement and collateral management. This market is a funding channel for US investment banks, and only large, creditworthy investment banks can participate. According to FRB NY (2010), prior to the financial crisis, large dealers raised $100 to $200 billion daily in the tri-party repo market. Sectors 2 and 3 are also interdealer markets, but are differentiated by the type of collateral they accept. Sector 2 is the GC financing market, where only US Treasuries and government guaranteed bonds are used as collateral, and is used when a large securities firm provides funding to a small securities firm (Copeland et al., 2015). Sector 3 uses only US Treasury securities as collateral, and small and medium-sized securities firms participate in the financing process. Both markets have in common that they are used as a funding channel for SMEs from PDs, and both are cleared through CCPs. In sector 3, however, small securities firms raise funds from large repo dealers not only because they are anonymous but also because the transmission of credit risk through the CCP is cut off in the event of crisis. Sector 4 is the market where large repo dealers provide prime brokerage services (PBS). In the GFC, the crisis started in the market between dealers and hedge funds of sector 4 [9].

The primary distinction between the European repo market and the US repo market lies in the evolution of their respective structures. Notably, the European repo market has predominantly transformed into a bilateral repo market, deviating from the tri-party repo market structure. Consequently, while in the US, repo dealers occupy a pivotal role within the tri-party repo market, engaging in leveraged investment and brokerage, the European repo market has not used significant leveraging through repo due to prudential regulations. In Europe, tri-party repo transactions are utilized only when the collateral is difficult to value, such as corporate bonds or structured securities (ECB, 2006) [10].

Repo trading in Europe is considered to have a more advanced infrastructure than in the US, including automated collateral management systems and CCP clearing. Before the financial crisis, Clearstream and Euroclear were in charge of collateral management in major European countries, and the entire process was automated. The process of selecting, allocating and substituting collateral has automatically been streamlined through advanced infrastructure. Notably, collateral securities that align with the eligibility criteria mutually agreed upon by counterparties are automatically chosen and allotted from the repo seller's account. Collateral can be automatically substituted at any time upon the repo seller's request, and the buyer is guaranteed that the collateral provided always meets the eligibility criteria. This automation contributes to heightened operational efficiency, facilitating smoother collateral management processes. In addition, Europe places a stronger emphasis on CCP clearing, which is accompanied by a well-established efficient collateral management. CCP clearing not only diminishes direct credit risk exposure to counterparties but also addresses information asymmetries linked to interbank credit risk.

Since the GFC, the US repo market has promoted infrastructure improvements based on the European repo market. As mentioned in the introduction, in the summer of 2022, the SEC announced a proposal to require all repo transactions to be cleared through a CCP provided by FICC. This move is part of an effort to build on the resilience and stability of repo infrastructure using CCPs and anonymous platforms [11].

Structural differences between the US and European repo markets led to significant differences in the recovery of trading after the financial crisis. Tri-party repo in the US continued to decline after the financial crisis, peaking at $2,261.4 billion in November 2012, before rebounding since April 2016. European repo markets, on the other hand, have experienced a rapid recovery since the financial crisis. Characteristically, Europe has seen a rapid increase in repo trades cleared through CCPs, with repo balances standing at $5.65 trillion as of December 2016. Of course, in Europe, the repo market experienced the same disruption as the unsecured market (trading only with high-quality counterparties and high-quality collateral) in the early stages of the financial crisis as in the US, but quickly recovered to pre-crisis volumes shortly after 2010 (Comotto, 2012). Notably, Spanish and Italian banks highlight that, in conjunction with CCPs, the adoption of anonymous trading through electronic platforms has significantly contributed to the resurgence of repo volumes (BIS, 2013). Moreover, the European Central Bank's decision to broaden the spectrum of collateral for monetary policy execution is also believed to have played a role in revitalizing the European repo market (Kim, 2021).

3.1 Structure of the Korean repo market

The Korean repo market has undergone a substantial expansion in terms of trading volume, stepping in to replace the call market as part of the government's overhaul of the short-term financial market. Prior to the financial crisis, short-term funding transactions among domestic financial institutions primarily relied on call transactions. However, post-crisis, the prominence of call transactions dwindled, giving way to a notable surge in repo transactions. This transformation was catalyzed by the systemic reform endeavors aimed at enhancing stability within the short-term financial market [12]. Prior to regulating non-banks' call market borrowing, the average trading balance of the call reached KRW 30–35 trillion, but as of April 2023, the average trading balance fell to less than KRW 10 trillion. On the other hand, the inter-institutional repo trading balance is over KRW 150 trillion as of April 2023.

Following the reshaping of the short-term financial market in 2015, it was anticipated that the repo rate, which represents secured borrowing, would converge to a level lower than or equal to the call rate, which represents unsecured borrowing. However, contrary to this expectation, since the reform, the repo rate has consistently maintained a premium over the interbank call rate, ranging from 0.05% to 0.2%. This means that although the repo market is a collateralized borrowing, the credit risk of the counterparty plays the most important role in the interest rate determination. In the US repo market, as well, the interest rate of repo transactions with small and medium-sized companies is higher than that of tri-party repo, which is a transaction between large IBs, even with the same collateral. Even if there is collateral, the credit risk of the counterparty is the most important factor in determining the interest rate.

The Korean repo market is divided into inter-institutional repo and retail repo. The former is a market for financing (lending) funds through repo among financial companies. In the inter-institutional repo market, money lenders are mainly MMFs and trust account of banks and securities companies, while money borrowers are securities companies, asset management companies and banks. Currently, more than 90% of inter-institutional repo transactions in Korea are in the form of tri-party repo, which is managed by the Korea Securities Depository. The retail repo market is a market where securities companies borrow funds from individual investors using government bonds, financial corporate bonds and other bonds as collateral as a means of financing bond investments. If there is a repurchase request in the retail repo market, the securities company responds to the repurchase request by selling the bonds in the inter-institutional repo market. Financial corporate bonds are the dominant form of collateral used in retail repo, and these securities present potential risks due to their tendency to become illiquid in times of crisis.

The Korean inter-institutional repo market is dominated by tri-party repos, which designate a financial firm as the clearing agent. In terms of collateral fungibility, GC repos allow for collateral substitution, but active collateral substitution is rarely utilized. A repo trade is similar to a specific collateral repo at the time of initiation, and after initiation, the collateral can be substituted with the consent of the counterparty. In addition, PvD (payment versus delivery) is adopted for each transaction instead of aggregating intraday transactions, making it difficult to arbitrage using repo.

In terms of the role of market makers, the Korean repo market is characterized by the absence of market makers. While repo dealers in the US and Europe borrow funds from lenders such as MMFs, and supply funds to borrowers such as hedge funds, in Korea, net suppliers and net demanders are direct counterparties. This is likely due to the small size of domestic hedge funds and the small size of Korean securities firms that provide PBS services to hedge funds. Given this environment, the introduction of a CCP has both positive and negative effects. On the negative side, when only net demanders/suppliers participate in repo, there is no multilateral netting of positions, and therefore the amount of risk netted may not be large. This means that the scale of balance-sheet provisioning is not large, and the actual reduction in capital required may be small [13]. In addition, the introduction of CCPs may have a negative impact on market-wide liquidity as it is expected to increase the complexity of the clearing and settlement process and increase costs for market participants.

One the positive side, if a repo dealer is absent, the repo market is vulnerable to counterparty risk as it involves direct participation of net demanders and suppliers with large credit quality differences. The failure of a small or medium-sized securities firm or hedge fund can directly affect the entire market. The collapse of the US repo market in the GFC was also triggered by the impairment of the collateral value of the subprime mortgage market in repo transactions between repo dealers (high credit quality) and hedge funds (low credit quality), leading to the bankruptcy of large securities companies. Therefore, the need for a CCP that can isolate risk contagion is even more necessary in the Korean repo market, where demanders and suppliers with different creditworthiness participate in direct transactions.

3.2 The current status of the Korean repo market

As mentioned earlier, the Korean repo market has grown rapidly following the government's reorganization of the short-term money market (Yoon and Kim, 2020). Figure 2 shows the average daily trading volume of the call market and the repo market. Until around January 2015, the call market had a larger trading volume, but since then, the average daily trading volume of the repo market has increased significantly. According to Table 1, the yearly trading volume more than doubled from 2016 to 2022, and the average daily volume tripled, reaching KRW 150 trillion by the end of 2022.

Table 2 shows the participation of financial firms in the inter-institutional repo by types of institutions. Domestic securities firms are the largest participants in the repo market (selling repos) with a share of about 49.5%, followed by asset management firms with a share of 24.8%. In terms of amount, domestic securities firms raise an average of KRW 82 trillion per day in the repo market, while asset management companies raise half of that amount, KRW 41 trillion. The data show that domestic securities firms have very short maturities and may be vulnerable in the event of a run due to a liquidity crisis. In the case of asset management firms, the data show a significant increase in funding through the repo market for leverage funds and hedge funds. Compared to the past, the proportion of repo sales by asset management firms has increased significantly, both in terms of percentage and amount. On the other hand, it is mainly MMFs of asset management firms that supply funds to the market. Asset management companies accounted for 39.2% of the total, while 26.5% were trust accounts of domestic banks. The recent growth of MMFs and ETFs has resulted in a significant increase in the supply of funds to the domestic repo market.

Table 3 shows the types of collateral used in the repo market. The collateral used in the repo market differs significantly between inter-institutional repo and retail repo. In the former, more than 70% of the total is collateralized by treasury bonds and monetary stabilization bonds, while in the latter, the share is lower, around 15%. On the other hand, in the retail repo market, financial bonds and agency bonds are mainly utilized as collateral, as they offer high yields. These bonds suffer from low liquidity in times of crisis, which could trigger a wider financial crisis in the event of a run.

On the other hand, the share of treasury bonds used in overseas repo transactions has reportedly increased to 70–80% since the financial crisis. This is due to the increased use of treasury bonds due to stricter regulation after the financial crisis, which is not much different from domestic inter-institutional repo. Table 4 shows the evolution of trading volumes (gross annualized volumes) of collateral used from 2016 to the most recent year, and shows that the volume of government bonds has increased by about KRW 1000 trillion over the seven-year period.

The potential systemic risk in the repo market is amplified by the interaction between the illiquidity of the collateral and the maturity of the repo transaction, that is, overnight repo or open repo exacerbates the crisis because the lenders can stop funding immediately in case of market stress. Table 5 shows the proposition of maturities in the inter-institutional repo market by year. While the share of open repos has remained unchanged over the years at around 2%, the share of overnight repos has decreased from 82% in 2019 to 62% in 2023. However, in terms of amount, it has increased from KRW 76 trillion to KRW 104 trillion, so it is difficult to conclude that liquidity risk has decreased.

Of course, the risk transfer effect may not be significant even if the overnight exposure is high, depending on the characteristics of the participants. If commercial banks with relatively low credit risk and with low leverage have a high proportion of overnight repos, the risk transfer effect may be small. According to the ratio by types of firms in Table 6, domestic securities firms and asset management companies, which mainly borrow funds, have a relatively high proportion of overnight repos at 61.7% and 83.9%, respectively. Leveraged funds that borrow money in the short term often use overnight repo to reduce borrowing costs. On the other hand, there is a difference between asset management companies and domestic banks (trusts) that borrow money, as the share of overnight repos is less than 60% for MMFs, while the share of overnight repos is over 96% for trust accounts of domestic banks.

As shown in Table 7, most of the retail repos are short-term repos with less than a week, and the share of transactions with a maturity of more than 7 days is very low. In other words, retail repos are characterized by low liquidity of the target collateral and short maturity, which is one of the biggest characteristics of the domestic retail repo market. This can be a potential risk in times of stress.

The characteristics of the Korean repo market can be summarized as follows. First, the domestic inter-institutional repo market is highly dependent on overnight transactions. Although the ratio of overnight transactions has been declining slightly recently, the amount of overnight repos has continued to increase, with the average daily balance exceeding KRW 100 trillion as of April 2023. Repos are being actively utilized as a means of financing for financial companies, and the use of short-term products has increased significantly. Second, in the domestic repo market, it is understood that the dealer function of large securities companies is absent. In the US and Europe, large securities firms and banks with high creditworthiness play the role of repo dealers. By borrowing funds from repo buyers such as MMFs and providing funds to small and medium-sized securities companies, they enhance the risk management and evaluation capabilities of the repo market and serve as a safety net against market shocks. On the other hand, in Korea, MMFs, large securities firms and small and medium-sized securities firms all enter into repo transactions as direct counterparties, which can cause major disruptions to the entire market if the supply of funds is interrupted due to short-term shocks.

4.1 The economic impact of CCP

In the wake of the GFC, global financial authorities have recognized the need to improve the transparency and stability of OTC derivatives markets. In particular, the establishment of infrastructure related to OTC derivatives trading, such as CCPs and trade repositories (TRs), is still receiving a lot of attention. In general, the post-trade process consists of clearing and settlement, with clearing being the step that finalizes the debts and liabilities between the trading parties. When clearing is done through a CCP, the CCP acts as a legal counterparty, and the counterparty's credit risk is replaced by the CCP's credit risk.

4.2 International examples

Most major countries introduced CCPs for repo trading around 2000. In the US and UK, existing clearing organizations launched CCP services at the request of market participants, while Japan established a stat-led clearing house. The US, Switzerland and Canada, which, like Korea, adopted repo rate as RFRs, all introduced CCPs for repo. In the overseas cases, CCPs were often established voluntarily by market participants, presumably for the purpose of balance sheet netting for repo transactions.

In major countries, even if CCPs have been voluntarily adopted by market participants, actual participation is not mandatory and is based on the market participant's choice. Repo trades are categorized into direct trades between parties, electronic trades using electronic platforms and brokered trades using brokerage firms, and depending on the type of trade, market participants can choose whether or not they want to be cleared by a CCP [16]. However, since the financial crisis, the proportion of CCP clearing for repo trades has been steadily increasing in most countries. This is due to the expectation that CCPs can mitigate systemic risk by hedging credit risk and preventing risk contagion. This is indirectly evidenced by the fact that even for repo trades with short maturities, the majority are cleared through CCPs.

As discussed earlier, the resilience of European repo markets during the financial crisis was due to the comprehensive infrastructure that had been in place since the early 2000s, including CCP clearing, automated collateral management systems and anonymous trading through electronic trading platforms. In order to reduce potential risks in the Korean repo market, it is necessary to provide electronic platforms that allow clearing through CCPs and anonymous trading. However, in the Korean repo market where only one-way trading exists, it may not be feasible for a private entity to establish a CCP on a voluntary basis. Therefore, it is recommended that the entity that establishes a CCP for the Korean repo market should be an entity that plays a public role in the financial market, such as an exchange or a depository.

In the US, in particular, the FICC, a bond clearing organization, was introduced in 1998 at the request of market participants. FICC is a wholly owned subsidiary of DTCC, a clearing and settlement company, and consists of GSD, which clears Treasuries, and MBSD, which clears mortgage-backed securities. Specifically, in 1998, GC repo was created by the Government Securities Clearing Corporation (GSCC), the predecessor of FICC, with the Bank of New York, Mellon and Chase banks, to lower repo transaction costs and increase liquidity. This repo market does not settle via delivery versus payment (DvP), but instead consolidates all GC repo positions of each dealer at the end of the day and utilizes collateral substitution using general collateral. This reduces transaction costs and reduces the cost of intraday collateral substitution.

In GC financing repo, large financial companies participate by becoming members of FICC, and if they are not members of FICC, they can use it indirectly through members. GC repo is available for Treasury securities, conforming mortgage-backed securities and obligations originated by government-sponsored entities. In the US, GC repo allows for multiple clearing banks to be designated, so a repo CCP can be used even if different clearing banks are used. The repo market in the US can be divided into FICC CCP repo market and non-CCP market. Among them, FICC CCPs are divided into inter-dealer transactions and broker transactions: inter-dealer transactions are mainly GC repos, while broker transactions are non-GC transactions using specific collateral.

In the UK repo market, repo trades cleared by LCH.Clearnet include Term ￡GC and €GC Repo plus. The repo consists of a collateral basket of UK government bonds (Term￡GC) and ECB eligible bonds (€GC Repo plus). In €GC Repo plus, the collateral baskets are categorized by creditworthiness: Basket 1 (LCR equivalent) consists of bonds that meet ECB liquidity classes L1A, L1B, L1C and ratings higher than A- for government bonds and AA- for other debt, and Basket 2 (ECB restricted) consists of ECB liquidity classes (L1A, L1B, L1C, L1D) and ratings higher than BBB [17].

Similarly, Euro GC Pooling in Europe is a basket repo product, with associated infrastructure including automated collateral selection and substitution capabilities. Euro GC Pooling is a platform product based on basket trading jointly developed by Eurex Repo, Eurex Clearing and Clearstream, all wholly owned subsidiaries of Deutsche Borse. Even for GC repo transactions, the specific collateral securities must be identified between the two parties at the trade stage, which is said to be the biggest inconvenience for unsecured market borrowers when participating in the repo market. With Euro GC Pooling, a pre-defined basket of eligible collateral is assigned an ISIN code and the basket is traded and cleared by Eurex Clearing. When trades are executed anonymously via Eurex Repo's electronic trading platform, Eurex Clearing automatically becomes counterparty to the original counterparty and is responsible for post-trade risk management, including haircut calculation and margin management. In this transaction, Clearstream performs the settlement and collateral management functions, that is, the repo trader deposits some of the basket components in a Clearstream account, and the selection, allocation and substitution of the securities in the basket to be provided by the repo seller to Eurex Clearing are all automated.

The repo CCPs in Japan, an Asian country like South Korea, are the overwhelming majority of the repo market in Asia, although the European repo market also trades in yen, due to the nature of the yen as an international currency (ASIFMA & ICMA, 2021). As of the 2021 survey, the majority of repo transactions in Japan are executed between parties via telephone or e-mail, with only limited electronic trading. Of these, CCP-clearing is less prevalent than in Europe, but has been increasing significantly in recent years. In Japan, most of the collateral used is Japanese government bonds, with some US Treasuries also being utilized.

In Canada, a repo CCP has been in operation since 2012. Since 1970, the Canadian Derivatives Clearing Corporation (CDCC) and the Canadian Depository for Securities (CDS) have operated as CCPs for repo transactions. CDCC is the only integrated CCP in North America that clears and settles bonds, futures and options, while CDS deposits more than $5 trillion in securities and processes 2 million trades per day. According to CDS’ analysis, the Canadian securities collateralized transactions market totaled C$446 billion in 2018, with CCP repo transactions worth approximately C$275 billion, representing 62% of the market.

4.3 CCP for repo contracts in Korea

Currently, repo transactions are executed in the following order. First, when a repo seller and a repo buyer execute a transaction through the intermediation of a money broker, the money broker sends the execution information to the Korea Securities Depository (KSD), and the seller and buyer check the transaction details registered with the KSD. If there is no problem with the transaction details, KDS applies to the Bank of Korea to settle the funds and proceeds with simultaneous settlement (DvP). The buyer receives the collateralized asset in the account of the depository, and the seller receives the funds through the Bank of Korea.

As shown in Figure 3, if a repo CCP is introduced, the counterparties of the buyer and seller will be divided into CCPs through novation. As a result, the process of trading with a CCP will change as follows. If a CCP is included, even if the CCP does not intervene in the execution of the trading series, it can indirectly limit it by having pre-risk control measures such as initial margin and participation constraints (Kim, 2021).

As shown in Figure 4, the introduction of a CCP in repo transactions adds the steps of novation, netting and contractual guarantee to the existing workflow. Through novation, the CCP becomes the counterparty and assumes the obligation, and settlement is made on a per-participant basis, taking into account netting.

The introduction of a repo CCP should be accompanied by the introduction of an electronic trading platform. In the European repo experience, resilience and stability have been the result of the anonymity of trade execution through electronic trading platforms and automated collateral management systems. In other words, having an automated system that determines the pool of general collateral and replaces collateral within the collateral pool is very important for the development of the repo market, and automation of the collateral management system is a basic requirement for the emergence of various repo trading platforms. Therefore, it is necessary to refer to the GC financing repo in the United States and GC pooling repo in Europe to develop the domestic repo market infrastructure. However, while in Europe, voice brokers broker repo transactions through electronic trading platforms, in Korea, it is necessary to make a policy decision on who will introduce electronic trading platforms. In the case of Korea, if the introduction of CCPs is promoted mainly by public institutions such as the Korea Exchange and the Korea Securities Depository, the development of electronic trading platforms will need to be prepared together with private market participants.

4.4 Other considerations

There are a number of other considerations when adopting a repo CCP. For example, in the US, the SEC recently proposed to mandate the clearing of OTC Treasury and repo trades to a single CCP provided by FICC. As shown in a survey by SIAPARTNERS (2023), mandatory CCP clearing could be a significant burden for small and medium-sized participants, and could eventually lead to a reduction in market liquidity. In Korea, where there is currently no CCP trading, mandating CCP clearing of all trades upon the establishment of a repo CCP could cause a significant market shock. In most of the cases described in Table 8, CCP clearing for repo was left to the discretion of market participants. However, the idea behind mandating CCPs is to improve resilience by cutting off risk transmission channels in times of market stress, and mandatory clearing may be introduced from this perspective. In addition, if it is difficult to mandate the clearing of repo CCPs, introducing a minimum collateral haircut for securities used as collateral may reduce the risk transmission effect in case of market instability.

Next, sufficient research on the risk management system of CCPs is needed. While CCP clearing is necessary to prevent risk transfer in the event of a crisis, the failure of CCPs to manage risk can have disastrous consequences for financial markets. For this reason, the establishment of a CCP should include a provision that the CCP may be subject to emergency liquidity support from financial authorities or central banks. In addition, the operation of the CCP's resolution fund should be discussed beforehand [18]. A CCP's resolution fund is a fund set up to compensate for losses resulting from the failure of the CCP and is funded by margin contributed by the CCP's members and used to compensate members for their losses in the event of the CCP's failure. The size of the CCP's resolution fund is determined by the size of the CCP and the risk level of its members, and market participants cannot set the size of the fund arbitrarily because it is recognized as a cost of trading.

In addition, objective standards should be established for the calculation of initial and variation margin by CCPs. It is necessary to establish a margin system with international consistency by referring to the cases of advanced CCPs abroad. An appropriate margin system is an important key to revitalizing repo transactions. For example, in the United States, the main concern of market participants for the mandatory clearing of CPPs was whether an appropriate margin calculation system was available (SIAPARTNERS, 2023).