Repo Markets - Experiences and opportunities in Hungary

More and more questions have arisen recently in the National Bank of Hungary about repo markets. The topic came into the lime light with the latest changes of monetary policy instruments. In addition, speculative activity on repo markets has given rise to some interesting questions. We have tried to sum up the main characteristics of repos beginning with the definitions and with the practices of international and Hungarian repo markets. We have attempted to investigate whether the size of the Hungarian repo market is really as insignificant as statistics show. Finally, we make a few suggestions which may increase the effectiveness of monetary policy by the stimulation of repo markets. Given that Hungarian literature on this topic is very scarce, our study is mainly based on foreign publications and consultations with market participants. When analysing the Hungarian repo market we faced a lot of problematic questions, some of them we have already met, others we faced here for the first time. These problems arise be cause of the lack of over all regulation, the misinterpretation of existing regulations, the reserve requirements of the National Bank, the settlement and accounting standards of repos, and because of the insufficient knowledge of market participants.