Key facts
- The Bank of England is no longer pursuing mandatory clearing for gilt cash and repo trades.
- Discussions now center on portfolio-based haircuts for bilateral repo agreements.
- The goal is to encourage voluntary clearing within the UK government bond market.
- This strategy may lead to a different regulatory path compared to the US Treasury market.
The Bank of England has moved away from the idea of mandatory clearing for gilt cash and repo trades. Industry discussions, facilitated by the central bank, are now concentrating on alternative methods to strengthen the UK government bond market. These include implementing portfolio-based haircuts for bilateral repo transactions and finding ways to promote voluntary clearing among market participants.
This strategic shift suggests the UK may adopt a regulatory framework for its gilt market that differs from the approach taken in the United States for Treasury cash and repo trades. The specifics of the US system, which reportedly involves mandatory clearing, are mentioned as a point of comparison.