Don’t Be Late! The Importance of Timely Settlement of Tri-Party Repo Contracts

Adam Copeland and Ira Selig

No 20141020, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Tri-party repo is popular among securities dealers as a way to raise short-term funding. The tri-party repo settlement process has been improved, and continues to be improved, with the implementation of a set of recent reforms. Two main goals of these reforms are to sharply reduce the amount of liquidity needed to facilitate the settlement of tri-party repo contracts, and to increase the use of more resilient sources of liquidity (for example, term financing and committed credit) to ensure that settlement can occur in good and bad times. In this post, we detail how the reforms have affected the sources of liquidity that dealers can use to facilitate settlement of tri-party repo contracts. We then explain cash investors’ role in the settlement process, and highlight how their current practice of sending principal payments late in the day disrupts the timely settlement of tri-party repo contracts.

Keywords: settlement; tri-party repos (search for similar items in EconPapers)
JEL-codes: E42 (search for similar items in EconPapers)
Date: 2014-10-20
References: Add references at CitEc
Citations:

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2014 ... -repo-contracts.html Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:86988

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().