Grim repo: clearing touted as saviour for shrinking market
CCPs wary of risks as they vie to launch buy-side repo services
The repo market is ill. Once the leverage ratio takes effect in 2018, banks operating matched books of borrowed and lent cash will be prevented from fully netting trades, and will be charged capital on a proportion of the total notional. The prospect has already caused the market to shrink by up to 60% in the US, according to one estimate.
There is an obvious cure: a comprehensive clearing solution that allows buy-side firms to join the incumbent banks, dramatically expanding their ability to
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