Are New Repo Participants Gaining Ground?

Adam Copeland, Ira Selig, and Anya Tarascina



Following the 2007-09 financial crisis, regulations were introduced that increased the cost of entering into repurchase agreements (repo) for bank holding companies (BHC). As a consequence, banks and securities dealers associated with BHCs, a set of firms which dominates the repo market, were predicted to pull back from the market. In this blog post, we examine whether this changed environment allowed new participants, particularly those not subject to the new regulations, to emerge. We find that although new participants have come on the scene and made gains, they remain a small part of the overall repo market.

Just Released: New York Fed Markets Data Dashboard

Antoine Martin, Susan McLaughlin, and Jordan Pollinger



The Federal Reserve Bank of New York releases data on a number of market operations, reference rates, monetary policy expectations, and Federal Reserve securities portfolio holdings. These data are released at different times, for different types of securities or rates, and for different audiences. In an effort to bring this information together in a single, convenient location, the New York Fed developed the Markets Data Dashboard, which was launched today.

Regulatory Incentives and Quarter-End Dynamics in the Repo Market

James Egelhof, Antoine Martin, and Noah Zinsmeister



Since the global financial crisis, central bankers and other prudential authorities have been working to design and implement new banking regulations, known as Basel III, to reduce risk in the financial sector. Although most features of the Basel III regime are implemented consistently across jurisdictions, some important details vary. In particular, banks headquartered in the euro area, Switzerland, and Japan report their leverage ratios—essentially, capital divided by total consolidated assets—as a snapshot of their value on the last day of the quarter. In contrast, institutions headquartered in the United States and the United Kingdom report most leverage ratio components as averages of their daily values over the quarter. In this post, we study the impact of this difference in regulatory implementation on rates and quantities borrowed in the U.S. repo market.

Which Dealers Borrowed from the Fed’s Lender-of-Last-Resort Facilities?

Viral V. Acharya, Michael J. Fleming, Warren B. Hrung, and Asani Sarkar



During the 2007-08 financial crisis, the Fed established lending facilities designed to improve market functioning by providing liquidity to nondepository financial institutions—the first lending targeted to this group since the 1930s. What was the financial condition of the dealers that borrowed from these facilities? Were they healthy institutions behaving opportunistically or were they genuinely distressed? In published research, we find that dealers in a weaker financial condition were more likely to participate than healthier ones and tended to borrow more. Our findings reinforce the importance of Bagehot’s principle that the lender-of-last resort should lend only against high-quality collateral and at a penalty rate so as to discourage unneeded or opportunistic borrowing.