Repo Reform And Shadow-Banking

There’s a lot talk from Fed governors, including the Fed Chairman Ben Bernanke, about the reforming the Repo market. One critique is that Repo funding is generally unstable, that is, cash Repo investors quickly flee a teetering bank leaving it insolvent. Then once a bank collaps
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Liquidations And Fire-Sales

The first recorded instance of the term “fire sale” is thought to come from an advertisement posted by Maraton Upton, a resident of Fitchburg, Massachusetts, who had suffered through a massive fire at his home in December 1856. Following the destruction, Upton no doubt needed money fo
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Negative Interest Rates: Repo Rates

Negative Specials Rates The term “Specials” in the Repo market refers to specific securities, like the current U.S. Treasury 10 year note, which trade at lower than regular market rates.  At times, short-demand for a security can outweigh the available supply causing settl
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Seg Funds, MF Global, Sentinel, And Saving The Futures Industry

It’s Not Sexy And I Know It I know, I know, Seg funds are not very interesting.  They’re certainly not fun to read about and even less fun to write about.  However . . . they are an extremely important issue for the futures industry after the events of MF Global, Sentinel
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FTT And The Destruction of The European Repo Market

The Financial Transaction Tax (FTT) According to some, it’s a done deal.  Trade processing vendors are already updating their systems to process the Financial Transaction Tax, which was only proposed by Brussels in February and not yet even ratified.  If adopted by the EU member
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Repo Roundup: Collateral Shortage, 10 Year Fails, Tri-Party Reform, Q-End

G.C. Rates General collateral rates have stayed above federal funds for most of the past month, with G.C. rates averaging 3 basis points above fed funds since February 15 due to the large amount of bill issuance since the end of February.  At the same time, G.C. experienced significan
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Mistakes Made By Jon Corzine And MF Global

MF Global news hit the front pages again last week, and gauging from it, I expect much more news in the future.  There was a report issued by Trustee Louis J. Freeh saying that Jon Corzine, the former CEO, deserves “much of the blame” for the firm’s collapse.  Freeh
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Five Bankruptcies That Created The Tri-Party Market

The History of Tri-Party Surprisingly, it took the bankruptcies of an assortment of small government bond dealers in the 1980s to create the Tri-Party market.  Before the 1970s, all Repo trades settled DVP (delivery versus payment) and were only traded between securities dealers and m
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Two Bankruptcies That Created The Modern Repo Market

It happens quite often when reading about the history of the financial markets or about the Federal Reserve.  Two company names are often mentioned:  Drysdale Securities and Lombard-Wall.  Not only are these two names important in the U.S. financial system, but they are also key devel
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Tri-Party Repo Reform, Then And Now

The Issue Was Settled, Wasn’t It ? On December 20, 2012 the Federal Reserve posted an announcement on their website about Recent Developments in Tri-Party Reform. For almost four years the Fed was concerned with potential flaws in the structure of the tri-party market that could
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