Hidden Road鈥檚 entrance into the fixed income and repo markets
27 June 2025
Michael Santoro, head of fixed income and global funding group, and Robert Zambarano, managing director, macro and rates strategist at Hidden Road, explore the core operational inefficiencies facing the repo market and the firm鈥檚 next steps to evolve this space
Image: stock.adobe.com/1438410640
In March 2025, Hidden Road Partners, a technology-driven, multi-product, multi-asset prime brokerage firm, announced its expansion into the fixed income and repo markets.
This move represents a strategic diversification of Hidden Road鈥檚 offerings as the firm aims to offer institutions a full suite of advanced services in clearing, prime brokerage, and financing across fixed income, foreign exchange (FX), digital assets, derivatives, and swaps.
Hidden Road鈥檚 fixed income prime brokerage platform initially focuses on fixed income repo and global funding services, facilitated through the firm鈥檚 approval as a Fixed Income Clearing Corporation (FICC) clearing member.
The firm鈥檚 entry into the fixed income space is led by Mike Santoro, an industry veteran who has led repo and funding operations at a number of global financial institutions, including BNP Paribas and Guggenheim Securities.
The team, whose members average over two decades of experience building and scaling matched-book fixed income repo businesses, aims to leverage Hidden Road鈥檚 technology and control infrastructure, scalable risk capital base, and ability to cross-margin across asset classes to offer a truly differentiated service to the institutional marketplace.
Understanding the repo market
The repo market is a cornerstone of short-term funding in the financial system. In a typical repo transaction, one party sells securities to another party in exchange for cash with an agreement to repurchase the securities at a later date, usually the next day, at a slightly higher price. This structure effectively makes repos a form of collateralised borrowing, with securities serving as collateral.
Repos are primarily used by financial institutions to manage short-term liquidity needs. They are also a key tool for central banks in implementing monetary policy.
For instance, the Federal Reserve utilises repos and reverse repos to regulate the money supply and influence short-term interest rates.
The repo market is large, with daily volumes often exceeding US$4 trillion in the US alone, the vast majority of which is in US Treasury securities.
The repo market is integral to maintaining the deep liquidity in the US Treasury market, which is commensurately large and growing due to ever-increasing US debt.
However, the repo market is also susceptible to stress. For example, at quarter and year-ends, funding pressure can spike as institutions, namely banks, seek to meet regulatory capital requirements, leading to increased repo rates.
US repo market is ripe for innovation
Despite its size and importance, operational inefficiencies persist in the repo market. For example:
鈥� Many trades are still managed using legacy infrastructure, manual processes, and fragmented settlement systems. This increases the risk of fails, delays, and reconciliation issues.
鈥� Many market participants, such as hedge funds, asset managers, and insurance companies, often struggle to access repo markets directly.
鈥� The current system is rife with collateral optimisation challenges; it does not allow for real-time, dynamic collateral management across asset classes and counterparties, thereby reducing capital efficiency.
鈥� Counterparty concentration risk is apparent, as the repo market relies heavily on a small number of large clearing banks and dealers. This creates bottlenecks and systemic vulnerabilities, especially during periods of market stress.
The role of non-bank entities
Historically, banks have dominated the repo market. However, in recent years, particularly following the global financial crisis, non-bank financial institutions have begun to play a more prominent role in the market as banks have scaled back their activities in the wake of increased regulation.
These entities, such as Hidden Road, bring several advantages to clients and the market:
1. Flexibility and innovation.
Non-bank entities are often more agile and unconstrained than traditional banks, allowing them to innovate and adapt quickly to market changes. Hidden Road鈥檚 technology-driven platform exemplifies this agility, offering real-time risk management and seamless execution across multiple asset classes.
2. Reduced conflicts of interest.
Unlike banks that have proprietary trading desks competing with clients, non-bank entities like Hidden Road do not take proprietary positions and do not have traders 鈥� emphasising a conflict-free approach. This model fosters trust and transparency, which are fundamental to the repo market.
3. Enhanced access to liquidity.
By leveraging technology and establishing relationships across various financial markets, non-bank entities can provide clients with enhanced access to liquidity. Hidden Road鈥檚 integration of fixed income, FX, OTC swaps, and digital asset services into a unified platform is a testament to this capability.
4. Regulatory compliance and infrastructure.
Non-bank entities that are members of clearing houses such as FICC can offer clients the benefits of centralised clearing, which enhances market stability and reduces counterparty risk. Hidden Road鈥檚 FICC membership enables it to facilitate efficient transactions and provide clients with improved access to liquidity.
As mentioned, Hidden Road鈥檚 unified platform provides a single access point to various markets and asset classes. This means clients can access the repo market without needing direct membership or large bilateral credit lines.
Moreover, clients can post a range of assets as collateral, thereby broadening market participation and increasing capital efficiency, particularly among multi-asset investors.
Hidden Road鈥檚 emphasis on real-time risk management, margining, and trade matching reduces operational friction and allows more scalable repo trading, including automated settlement and dynamic collateral reuse.
In an era where financial markets are increasingly interconnected and complex, Hidden Road鈥檚 approach provides clients with the tools and infrastructure needed to navigate these challenges effectively.
The next evolution
In April 2025, Hidden Road announced that it entered into a definitive agreement to be acquired by Ripple, a provider of digital asset infrastructure for financial institutions, for US$1.25 billion 鈥� creating one of the largest non-bank prime brokers globally.
With the backing of billions of dollars of capital from Ripple, Hidden Road will exponentially expand its capacity to service its pipeline and manage a much larger balance sheet dedicated to the repo business.
The transaction also marks a significant milestone in the convergence of traditional finance and digital assets and the integration of solutions spanning both markets.
For example, Ripple USD (RLUSD), Ripple鈥檚 stablecoin pegged to the US dollar, will be utilised as collateral across Hidden Road鈥檚 prime brokerage products, including in repo transactions.
This cross-margining capability between digital and traditional assets offers clients greater flexibility and efficiency in managing their portfolios.
Fragmented markets, regulatory constraints, and dated technology have created demand for disruption to legacy capital markets infrastructure.
The repo market is no different. As a multi-product, multi-asset, non-bank prime brokerage business with technology at its core, Hidden Road is poised to offer repo market participants and other institutional clients stable funding, operational efficiency, and an overall superior client experience.
This move represents a strategic diversification of Hidden Road鈥檚 offerings as the firm aims to offer institutions a full suite of advanced services in clearing, prime brokerage, and financing across fixed income, foreign exchange (FX), digital assets, derivatives, and swaps.
Hidden Road鈥檚 fixed income prime brokerage platform initially focuses on fixed income repo and global funding services, facilitated through the firm鈥檚 approval as a Fixed Income Clearing Corporation (FICC) clearing member.
The firm鈥檚 entry into the fixed income space is led by Mike Santoro, an industry veteran who has led repo and funding operations at a number of global financial institutions, including BNP Paribas and Guggenheim Securities.
The team, whose members average over two decades of experience building and scaling matched-book fixed income repo businesses, aims to leverage Hidden Road鈥檚 technology and control infrastructure, scalable risk capital base, and ability to cross-margin across asset classes to offer a truly differentiated service to the institutional marketplace.
Understanding the repo market
The repo market is a cornerstone of short-term funding in the financial system. In a typical repo transaction, one party sells securities to another party in exchange for cash with an agreement to repurchase the securities at a later date, usually the next day, at a slightly higher price. This structure effectively makes repos a form of collateralised borrowing, with securities serving as collateral.
Repos are primarily used by financial institutions to manage short-term liquidity needs. They are also a key tool for central banks in implementing monetary policy.
For instance, the Federal Reserve utilises repos and reverse repos to regulate the money supply and influence short-term interest rates.
The repo market is large, with daily volumes often exceeding US$4 trillion in the US alone, the vast majority of which is in US Treasury securities.
The repo market is integral to maintaining the deep liquidity in the US Treasury market, which is commensurately large and growing due to ever-increasing US debt.
However, the repo market is also susceptible to stress. For example, at quarter and year-ends, funding pressure can spike as institutions, namely banks, seek to meet regulatory capital requirements, leading to increased repo rates.
US repo market is ripe for innovation
Despite its size and importance, operational inefficiencies persist in the repo market. For example:
鈥� Many trades are still managed using legacy infrastructure, manual processes, and fragmented settlement systems. This increases the risk of fails, delays, and reconciliation issues.
鈥� Many market participants, such as hedge funds, asset managers, and insurance companies, often struggle to access repo markets directly.
鈥� The current system is rife with collateral optimisation challenges; it does not allow for real-time, dynamic collateral management across asset classes and counterparties, thereby reducing capital efficiency.
鈥� Counterparty concentration risk is apparent, as the repo market relies heavily on a small number of large clearing banks and dealers. This creates bottlenecks and systemic vulnerabilities, especially during periods of market stress.
The role of non-bank entities
Historically, banks have dominated the repo market. However, in recent years, particularly following the global financial crisis, non-bank financial institutions have begun to play a more prominent role in the market as banks have scaled back their activities in the wake of increased regulation.
These entities, such as Hidden Road, bring several advantages to clients and the market:
1. Flexibility and innovation.
Non-bank entities are often more agile and unconstrained than traditional banks, allowing them to innovate and adapt quickly to market changes. Hidden Road鈥檚 technology-driven platform exemplifies this agility, offering real-time risk management and seamless execution across multiple asset classes.
2. Reduced conflicts of interest.
Unlike banks that have proprietary trading desks competing with clients, non-bank entities like Hidden Road do not take proprietary positions and do not have traders 鈥� emphasising a conflict-free approach. This model fosters trust and transparency, which are fundamental to the repo market.
3. Enhanced access to liquidity.
By leveraging technology and establishing relationships across various financial markets, non-bank entities can provide clients with enhanced access to liquidity. Hidden Road鈥檚 integration of fixed income, FX, OTC swaps, and digital asset services into a unified platform is a testament to this capability.
4. Regulatory compliance and infrastructure.
Non-bank entities that are members of clearing houses such as FICC can offer clients the benefits of centralised clearing, which enhances market stability and reduces counterparty risk. Hidden Road鈥檚 FICC membership enables it to facilitate efficient transactions and provide clients with improved access to liquidity.
As mentioned, Hidden Road鈥檚 unified platform provides a single access point to various markets and asset classes. This means clients can access the repo market without needing direct membership or large bilateral credit lines.
Moreover, clients can post a range of assets as collateral, thereby broadening market participation and increasing capital efficiency, particularly among multi-asset investors.
Hidden Road鈥檚 emphasis on real-time risk management, margining, and trade matching reduces operational friction and allows more scalable repo trading, including automated settlement and dynamic collateral reuse.
In an era where financial markets are increasingly interconnected and complex, Hidden Road鈥檚 approach provides clients with the tools and infrastructure needed to navigate these challenges effectively.
The next evolution
In April 2025, Hidden Road announced that it entered into a definitive agreement to be acquired by Ripple, a provider of digital asset infrastructure for financial institutions, for US$1.25 billion 鈥� creating one of the largest non-bank prime brokers globally.
With the backing of billions of dollars of capital from Ripple, Hidden Road will exponentially expand its capacity to service its pipeline and manage a much larger balance sheet dedicated to the repo business.
The transaction also marks a significant milestone in the convergence of traditional finance and digital assets and the integration of solutions spanning both markets.
For example, Ripple USD (RLUSD), Ripple鈥檚 stablecoin pegged to the US dollar, will be utilised as collateral across Hidden Road鈥檚 prime brokerage products, including in repo transactions.
This cross-margining capability between digital and traditional assets offers clients greater flexibility and efficiency in managing their portfolios.
Fragmented markets, regulatory constraints, and dated technology have created demand for disruption to legacy capital markets infrastructure.
The repo market is no different. As a multi-product, multi-asset, non-bank prime brokerage business with technology at its core, Hidden Road is poised to offer repo market participants and other institutional clients stable funding, operational efficiency, and an overall superior client experience.
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