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Will Central Clearing Change the Market Structure of U.S. Treasury Repo to Become More Standardized and Trade on an All-to-All Basis?

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Abstract

This paper examines whether the SEC’s mandate for central clearing of U.S. Treasury repo transactions could enable all-to-all trading and support the development of a standardized term repo market. By mitigating counterparty risk through central clearing, cash lenders may become more willing to transact directly with a broader set of borrowers, reducing reliance on dealer intermediation. Clearing may also encourage greater participation in term repos beyond overnight tenors if counterparty risk is reduced. However, for all-to-all trading to take hold, the market must adopt more standardized contract terms, collateral schedules, and operational protocols, such as consolidated trade execution and post-trade processing. If these structural and operational hurdles are addressed, an all-to-all term repo market could emerge—enhancing liquidity, reducing rollover risk, and improving the resilience of the U.S. financial system.

Suggested Citation

  • Ketan B. Patel, 2026. "Will Central Clearing Change the Market Structure of U.S. Treasury Repo to Become More Standardized and Trade on an All-to-All Basis?," Working Paper Series WP 2026-02, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:103255
    DOI: 10.21033/wp-2026-02
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    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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