Richard Comotto
The Repo Master
Richard Comotto began his career at the Bank of England, where he served for 10 years. After that, he served as an advisor to the IMF and Academic Institutions, then at the ICMA Centre at Reading University, England, and as an advisor to the ICMA (International Capital Markets Association). Comotto’s specialization is Repo, the largest financial market in the world, with an estimated $40-50T (Trillion) Current Amount Outstanding globally.
What keeps Comotto engaged with Repo is the complexity of using what is, structurally, a very simple transaction. Repo, he lovingly states, is the “convergence of law, operations, regulations, and economics.” There are always new and interesting developments in the Repo Market from ESG, DLT Repo, Islamic Repo, and Emerging Markets Repo.
One question Comotto focuses his attention on is “What makes markets?” While information on the answer to this question is scarce, Comotto believes in providing people curious about it with the best possible answers. And thus, he is proud of the fact that his FAQs page on Repo with ICMA is one of the most-read webpages on the site - linked here.
In his work, Comotto is always trying to find what works and what the markets actually care about. Since he started working with ICMA, he has conducted 50 Market Surveys (every 6 months) in Europe to evaluate the latest trends, then researched them earnestly with an open mind.
His work has led him into the world of DLT Repo in a significant way, where he admits there is “A lot of DLT, but not enough Repo.” He is currently working on a report for ICMA covering many topics across the DLT Repo space with Membrane Labs. While he acknowledges there is a lot of interesting innovation in the space, he was keen to differentiate Stablecoins vs. Tokenised Deposits.
While Tokenised Deposits sit in a legal framework, enable netting, and open free-float capabilities, he is hesitant to say that Stablecoins are truly “cash.” And without going too deeply into the Stablecoin topic, he reminds us that operational delivery is not legal delivery. As for the innovation of smart contracts, he pointedly remarked: “There is a lot of discretion in Repo transactions, and it is yet to be seen if smart contracts will have the flexibility required to meet these needs.”
Comotto describes two pillars for understanding what Repo truly is: 1) the legal nature of buying and selling, and 2) the economic nature of lending and borrowing.
While Comotto continues to be a go-to expert, sought-after professor, and a thought leader in the space, he encourages others to take the time to learn about Repo. His advice for newcomers is 1) “Be ready to be surprised.” The scope and importance of the market are often poorly understood, and its complexity turns off many learners. 2) “It is worth your time to learn it, and it affects your life.” 3) There is a lot of bad information out there, so be willing to discern if the information is bad and move on.
I asked Comotto what resources he would recommend – he recommended the ICMA Repo FAQs page and the work of Marcia Stigum (linking here to the repo and reverse repo book here - while he says the Stigum is a bit dated, it’s still worth the foundational knowledge).