A technical report prepared for the Financial Market Commission (CMF) raises the need to
advance the development of the REPO market in Chile.

The document—developed by Kevin Cowan, Pablo García, Alberto Etchegaray, Sebastián Infante and Carlos Pulgar, with the collaboration of experts from the Central Securities Depository from Chile, DCV,—argues that repurchase agreements (REPO) are a fundamental instrument for deepening the fixed-income market, as they facilitate the participation of a greater number of actors and improve the circulation of liquidity.

In simple terms, a REPO is short-term financing backed by assets—usually sovereign bonds. In practice, it operates as a spot sale of instruments with a future repurchase obligation: an institution delivers bonds as collateral, receives liquidity, and commits to repurchasing them at a future date. In more developed economies, this mechanism allows liquidity to flow efficiently, even in periods of high uncertainty.

Chile’s gap is significant. Currently, the local REPO market accounts for just 0.9% of GDP, well below comparable economies: in Mexico it reaches around 10%, in Brazil around 20%, and in the Eurozone it exceeds 70% of GDP.

According to the report, a deeper REPO market would expand financing and investment options for actors such as mutual funds, pension fund administrators, insurance companies, and investment funds—industries that are highly developed in Chile—and could facilitate the entry of foreign institutional investors. Greater use of REPOs would also help reduce the fragmentation between the debt market and the interest rate derivatives market, moving toward a more integrated and efficient financial system.

Gaps and roadmap

The report identifies legal, regulatory, tax, accounting, and operational gaps that have limited the development of this market in the country. Among the main measures proposed are:

● The creation of a Public-Private Committee for the Development of the REPO Market, led by the Central Bank.
● Regulatory and tax harmonization among the different financial sectors.
● Implementation of an electronic transaction registry.
● Evaluation, at a later stage, of a centralized clearing infrastructure.

It should be noted that, from the DCV’s perspective, the promotion of this market is directly aligned with our institutional purpose: to contribute to the development and strengthening of the Chilean capital market by providing a secure, efficient, and reliable infrastructure for all participants.

Although the report states that Chile has favorable conditions for progress—including a strengthened legal framework and robust financial infrastructure—the development of the REPO market will not happen spontaneously. It will require leadership, public-private coordination, and gradual implementation to consolidate this instrument as a structural pillar of the Chilean financial system.

READ THE FULL REPORT HERE (Spanish only)