Repo Intermediation and Central Clearing: An Analysis of Sponsored Repo

Adam Copeland and Robert Kahn

No 1140, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper evaluates the salient forces behind a dealer-intermediary’s decision to move a bilateral repo transaction with a customer into central clearing. We provide evidence that dealers turn to sponsored repo on occasions when balance sheet space is scarce, such as when there is a large issuance of Treasury coupon securities and end-of-month dates. We also find that sponsored repo spreads tend to be affected by a range of factors, with the three largest drivers being money market fund assets, a proxy for hedge fund demand for repo funding, and end-of-month dates.

Keywords: repo; sponsored services; central clearing; money markets (search for similar items in EconPapers)
JEL-codes: G12 G23 (search for similar items in EconPapers)
Pages: 44
Date: 2024-12-01
New Economics Papers: this item is included in nep-mon
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DOI: 10.59576/sr.1140

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