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24 posts on "Repo"November 07, 2011
Remaining Risks in the Tri-Party Repo Market
Antoine Martin
The tri-party repo market is one in which large U.S. securities firms and bank securities affiliates (dealers) finance much of their fixed-income securities inventories. A New York Fed white paper and the Financial System Oversight Council annual report have highlighted the risks to financial stability arising from the current infrastructure of this market. The Tri-Party Repo Infrastructure Reform Task Force (Task Force), an industry group sponsored by the New York Fed, has been working on reforms that would address some of these concerns. Unfortunately, a key aspect of the reforms—capped and committed clearing bank credit—has been delayed. In this post, I describe the remaining risks created by this delay.
Continue reading "Remaining Risks in the Tri-Party Repo Market" »
October 18, 2011
Just Released: Money and Payments Workshop Examines Repo Market Reform
Gara Afonso and Antoine Martin
We have just posted the proceedings of a workshop held on October 7, 2011, which gathered the very latest thinking by academics, central bankers, and practitioners on how the repo market should be reformed to help avoid a recurrence of the recent financial crisis. In this large and important market, securities dealers find short-term funding for a substantial portion of their own and their clients’ assets. The difficulties experienced by Bear Stearns and Lehman Brothers in 2008 clearly owed much to the precipitous declines in the funding that these firms had long obtained from the tri-party repo market.
Continue reading "Just Released: Money and Payments Workshop Examines Repo Market Reform" »
July 20, 2011
Stabilizing the Tri-Party Repo Market by Eliminating the “Unwind”
Antoine Martin
On July 6, 2011, the Task Force on Tri-Party Repo Infrastructure—an industry group sponsored by the New York Fed—released a Progress Report in which it reaffirmed the goal of eliminating the wholesale “unwind” of repos (and the requisite extension of more than a trillion dollars of intraday credit by repo clearing banks), but acknowledged unspecified delays in achieving that goal. The “unwind” is the settlement of repos that currently takes place each morning and replaces credit from investors with credit from the clearing banks. As I explain in this post, by postponing settlement until the afternoon and thereby linking the settlement of new and maturing repos, the proposed new settlement approach could help stabilize the tri-party repo market by eliminating the incentive for investors to withdraw funds from a dealer simply because they believe other investors will do the same. In effect, eliminating the unwind can reduce the risk of the equivalent of bank runs in the repo market, or “repo runs.”Continue reading "Stabilizing the Tri-Party Repo Market by Eliminating the “Unwind” " »
April 11, 2011
Everything You Wanted to Know about the Tri-Party Repo Market, but Didn't Know to Ask
Lucinda Brickler,* Adam Copeland, and Antoine Martin
The tri-party repo market is a large and important market where securities dealers find short-term funding for a substantial portion of their own and their clients’ assets. The Task Force on Tri-Party Repo Infrastructure (Task Force) noted in its report that “(a)t several points during the financial crisis of 2007-2009, the tri-party repo market took on particular importance in relation to the failures and near-failures of Countrywide Securities, Bear Stearns, and Lehman Brothers.” In this post, we provide an overview of this market and discuss several reforms currently under way designed to improve functioning of the market. A recent New York Fed staff report provides an in-depth description of the market.
About the BlogLiberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
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