Grim repo: clearing touted as saviour for shrinking market

Four clearing houses are working on buy-side repo services – a possible saviour for a market suffocating under the weight of the leverage ratio – but the risk management and operational challenges are severe. Kris Devasabai reports

grim-reaper-shutterstock-241810123
Grim shrinkage: repo market has contracted by 'up to 60%' in the US

The repo market is ill. Once the leverage ratio takes effect in 2018, banks operating matched books of borrowed and lent cash will be prevented from fully netting trades, and will be charged capital on a proportion of the total notional. The prospect has already caused the market to shrink by up to 60% in the US, according to one estimate.

There is an obvious cure: a comprehensive clearing solution that allows buy-side firms to join the incumbent banks, dramatically expanding their ability to

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here