LONDON, April 27 (Reuters) - Interdealer broker Tradition will next month launch the first stages of a platform for the trading of collateral such as government bonds in an effort to improve liquidity and transparency in the market, it said on Wednesday.
Tradition, owned by Swiss-listed Compagnie Financière Tradition, will initially launch the platform, Elixium, with a limited range of products to build up liquidity, the company said in a statement.
Repos, in which short-term loans are offered in return for collateral such as government or corporate bonds, are used by banks and companies to manage their cash balances.
Increased regulation has pushed down profits, forcing some banks and dealer-brokers that offered repo services to restructure their businesses or even withdraw from the market.
“The driver for this is the disconnect we have currently in the marketplace, brought about by regulation,” said Dan Marcus, global head of strategy and business development at Tradition.
Elixium will offer peer-to-peer trading of collateral for banks, institutional investors, brokers and hedge funds, Tradition said in the statement.
Marcus said that about 25 institutions, the bulk of which are banks and fund managers, had already completed the first part of the legal process to operate on the platform.
Institutional investors such as insurers often have large amounts of low-yielding cash on their balance sheets, which they could put to work by lending it out as repos, Marcus said.
Nick McCall, who previously managed Tradition’s UK fixed-income business, will be Elixium’s chief executive, Tradition said. (Reporting by Carolyn Cohn and John Geddie; Editing by David Goodman)