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Repo Intermediation and Central Clearing: An Analysis of Sponsored Repo

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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.

Suggested Citation

  • Adam Copeland & R. Jay Kahn, 2024. "Repo Intermediation and Central Clearing: An Analysis of Sponsored Repo," Staff Reports 1140, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:99298
    DOI: 10.59576/sr.1140
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    References listed on IDEAS

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    1. Gara Afonso & Marco Cipriani & Adam Copeland & Anna Kovner & Gabriele La Spada & Antoine Martin, 2021. "The Market Events of Mid-September 2019," Economic Policy Review, Federal Reserve Bank of New York, vol. 27(2), pages 1-26, August.
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    More about this item

    Keywords

    repo; sponsored services; central clearing; money markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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