The Middle East’s capital markets have seen a surge in bond issuance and liquidity needs, driving interest in repo and securities finance. GCC sovereign issuers sold roughly USD 64.7 billion of debt in 2023, up 74% from the previous year, and MENA total issuance jumped 83% to USD 69.9 billion.
This deluge of bonds has put repo markets on investors’ radar. In Dubai, HSBC recently executed the first international securities lending transaction on the Dubai Financial Market. However, the region’s repo markets remain underdeveloped and fragmented.
Diverse legal regimes across GCC countries, along with a lack of cross-border clearinghouses, make standardising repos difficult. For example, Oman’s central bank once injected USD 20 billion of liquidity via repo facilities in 2020, but other markets lack a comparable mechanism. Without a uniform legal framework or centralised clearing, international investors face uncertainty over enforceability and settlement.
Several hurdles block the path to security. Regulatory fragmentation, for example, differs from country to country regarding Islamic vs. conventional repo rules. New standards like the IIFM’s Master Collateralised Murabaha Agreement (MCMA) and AAOIFI’s Sharia repurchase guidelines aim to harmonise Islamic repos, but adoption is uneven.
Then, there are collateral constraints, as effective collateral management is still in its early stages. Many MENA (Middle East and North Africa) markets lack collateral inventory beyond sovereign bonds, and there are few established tri-party or repo-specific custodial platforms. The result is persistent liquidity “cliffs” when markets tighten.
Finally, there is settlement infrastructure. Most markets still settle on a T+2 or longer cycle without netting of repo exposures. Clearing and settlement systems are only now beginning to upgrade. Bahrain’s new Absolute Collateral platform (launched in 2024) and integration initiatives between regional CSDs aim to remedy this by allowing pledged assets to move more freely.
Despite these challenges, reforms are underway. Central banks and exchanges are laying the groundwork for deeper money-market operations. The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has mandated unified repo forms in major Gulf states (Bahrain, Qatar, UAE).
Conferences and industry forums in 2024 (e.g., Absolute Collateral MENA, Securities Finance Symposium Riyadh) have explicitly focused on enhancing repo and securities lending. Meanwhile, regional banks and asset managers are gradually building repo desks: they use short-term buy/sellbacks to finance bond holdings or leverage portfolios, albeit cautiously due to market opacity.
But let’s be honest, the Middle East isn’t inventing the wheel here; it’s trying to catch up. While Singapore, Hong Kong, and even Malaysia have spent the past two decades perfecting repo markets that hum like precision engines, the GCC is still tinkering under the hood.
The difference? In Asia, governments didn’t wait for consensus. They standardised documentation, set up tri-party clearing, and let liquidity flow. In MENA, by contrast, every regulator wants their own version of the rules, their own sandbox, and their own headline reform.
The irony is rich. It’s a region built on oil, the world’s most liquid commodity, yet it still struggles to build liquidity in its own financial system. But the good news is that the learning curve is shorter now. The Gulf can skip the analogue era, go digital, and, if it plays its cards right, compress two decades of market evolution into five years.
The potential upside is significant. A functioning repo market would allow MENA issuers to tap lower-cost financing and investors to better hedge and rotate collateral. As ION Capital noted, active repo trading can “increase liquidity for local bonds, mitigate the risk of illiquid bonds stuck in portfolios, and improve collateral management.”
Over time, this could deepen yield curves (as bond issuance becomes more tradable) and encourage more diversified asset investment. For instance, in the UAE, the central bank has started using repurchase agreements as an open-market tool (mirroring other advanced markets).
If the region continues aligning with global standards on documentation, T+1/T+0 settlement cycles, and perhaps a regional CCP, the repo/securities-finance revolution may mature into robust plumbing for the GCC’s financial system. Greater market depth and better risk management (through rehypothecation and collateral swaps) would be a welcome by-product of this structural shift.