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Follow the Cash! Microstructure of Repo Markets

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Abstract

The repo market in the U.S. is a mosaic of segments with distinct participants and various settlement and clearing practices. Why do large cash lenders typically settle their trades through a third-party agent? Why does the interdealer market clear through a central counterparty? Why do levered investors favor bilateral trades? In the second post of this series, we follow the cash as it navigates through repo markets to better understand the costs and benefits that shape the existing market structures.

Suggested Citation

  • Gara Afonso & Jun-Davinci Choi & Gonzalo Cisternas & Will Riordan, 2026. "Follow the Cash! Microstructure of Repo Markets," Liberty Street Economics 20260929, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:103827
    DOI: 10.59576/lse.20260929
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    File URL: https://libertystreeteconomics.newyorkfed.org/2026/09/follow-the-cash-microstructure-of-repo-markets/
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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