Journal Article

The financial plumbing of the GCF Repo® Service

Abstract: The authors describe the ways that intraday credit was used to facilitate the settlement of trades before reforms to the tri-party repo settlement system. In particular, they focus on two main processes: the end-of-day settlement and the morning unwind. The authors then describe why this extension of intraday credit by the clearing banks is problematic, specifically pointing to concerns that a clearing bank may not be able to absorb the impact of a failing dealer. The authors also discuss various reforms to the tri-party repo settlement process, which, they note, are likely to influence the costs of settling GCF Repo transactions.

Keywords: financial intermediation; GCF Repo; tri-party repo reforms;

JEL Classification: G23; E42; G28; E58;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Economic Policy Review

Publication Date: 2015

Issue: 2

Pages: 7-24