The BSP strongly believes that the establishment of an organized repo market is a key element in developing and deepening the domestic financial market. In particular, the organized interdealer repo market is expected to boost market liquidity and enhance price discovery as it gives GSEDs the ability to quote two-way prices.
Further, the “deliver-out, true sale basis” feature of this instrument is expected to provide market makers the ability to take positions and provide them greater flexibility in managing their portfolios. We recognize, however, that the reuse of underlying government securities without appropriate safeguards can contribute to increased counterparty and settlement risks, as well as the build-up of excessive leverage in the financial system.