Discussion Paper

Remaining Risks in the Tri-Party Repo Market

Abstract: 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.

Keywords: unwind; Tri-party repo market; settlement;

JEL Classification: G1;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2011-11-07

Number: 20111107