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Financial Innovation: The Origins of the Tri-Party Repo Market

Author

Listed:
  • Antoine Martin
  • Susan McLaughlin

Abstract

The conventional wisdom about financial innovation is that it is typically undertaken as a way to increase profits. However, financial innovation can also occur as a response to the need to reduce risk. Tri-party repo is an example of such innovation. While tri-party repo ultimately evolved in ways that created and amplified systemic risk (as we describe in the second post in this series), its origin was as a solution to inefficiencies and risks associated with the repo settlement arrangements prevailing at the time.

Suggested Citation

  • Antoine Martin & Susan McLaughlin, 2015. "Financial Innovation: The Origins of the Tri-Party Repo Market," Liberty Street Economics 20150511, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87029
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    Keywords

    Tri-party repo;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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