March 2014

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The US repo market will reach a turning point in the next two years when it faces actual regulatory change. As a well-tested mechanism for risk transfer and funding of positions, repo will survive – it is in fact extremely important for modern financial markets and too useful to lose. The challenge is making repo safer while maintaining its structure. The last thing regulators or market participants want are changes that make repo less flexible and less able to facilitate treasury and other US financial market trades. This is a difficult balance to maintain however.

In this report, Finadium analyzes the current and future state of the US repo market through conversations with market participants, analysis of proposed regulations and a review of available US repo data. We present an enhanced methodology for data collection that should meet the needs of regulators creating trade repositories and industry participants that want better clarity and arguments for why repo is a safe, critical tool in financial markets. Lastly, we review nine areas to watch in the next two years that will reshape the US repo market, including changing demands for facilitating client business, the role of the Federal Reserve’s Reverse Repo Facility, and the potential growth of repo CCPs as suggested by both industry participants and the Financial Stability Board.

This report should be read by repo dealers, liquidity managers, cash investors, legal advisors, policy makers, fixed income investors and others with a vested interest in a safe, robust US repo market. Repo is highly intertwined with other financial market activities; this report seeks to identify areas where divergent interests can find common ground, especially in the collection and management of US data.

This report is 33 pages with 5 exhibits.


■ Executive Summary

■ Managing the Pace of Change

■ Three Types of Regulation for Repo

■ Tri-Party, Bilateral and the Federal Reserve
– The Impact So Far of the Fed’s Reverse Repo Facility

■ The State of US Public Repo Data
– Primary Dealer Data
– The Tri-Party Market

■ A Methodology for Data Collection on the US Repo Market
– Gross Balance Sheet Data Collection
– Term Balance Sheet Questions
– Qualitative Questions

■ Nine Areas to Watch for 2014-2015

■ About the Authors

■ About Finadium


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