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A primer on the GCF Repo® Service

Author

Listed:
  • Paul Agueci
  • Leyla Alkan
  • Adam Copeland
  • Isaac Davis
  • Antoine Martin
  • Kate Pingitore
  • Caroline Prugar
  • Tyisha Rivas

Abstract

This primer provides a detailed description of the GCF Repo Service, a financial service provided by the Fixed Income Clearing Corporation. The primer is composed of an introductory note and two separate papers. {{p}} The first paper focuses on the clearance and settlement of GCF Repo. These financial plumbing details are especially important because the settlement of GCF Repo has been and will continue to be impacted by the current reforms to the tri-party repo settlement platform. In particular, the authors lay out the various ways that intraday credit was used pre-reform to facilitate the settlement of GCF Repo and why this use of credit is problematic. They also describe the reforms that are planned or in effect already, and consider how these reforms affect the use of intraday credit. {{p}} The second paper examines how dealers use the GCF Repo Service. The authors first describe the various strategies that dealers employ when trading GCF Repo and then use empirical analysis to quantify the predominance of these strategies. {{p}} Although they focus on different aspects of the GCF Repo Service, the two papers are complementary. This is because the strategies that dealers follow in trading GCF Repos are influenced by the clearance and settlement procedures in place. Furthermore, when gauging the risks of potential changes to the clearance and settlement of GCF Repo, it is important to take into account how GCF Repos are traded. Consequently, the papers are presented jointly so as to encourage readers to become familiar with both aspects of the GCF Repo Service.

Suggested Citation

  • Paul Agueci & Leyla Alkan & Adam Copeland & Isaac Davis & Antoine Martin & Kate Pingitore & Caroline Prugar & Tyisha Rivas, 2014. "A primer on the GCF Repo® Service," Staff Reports 671, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:671
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    Citations

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    Cited by:

    1. Bank for International Settlements, 2017. "Repo market functioning," CGFS Papers, Bank for International Settlements, number 59, Autumn.
    2. Ranaldo, Angelo & Rupprecht, Matthias, 2016. "The Forward Premium in Short-Term Rates," Working Papers on Finance 1619, University of St. Gallen, School of Finance, revised Sep 2019.
    3. Viktoria Baklanova & Adam Copeland & Rebecca McCaughrin, 2015. "Reference Guide to U.S. Repo and Securities Lending Markets," Working Papers 15-17, Office of Financial Research, US Department of the Treasury.
    4. Ebner, André & Fecht, Falko & Schulz, Alexander, 2016. "How central is central counterparty clearing? A deep dive into a European repo market during the crisis," Discussion Papers 14/2016, Deutsche Bundesbank.
    5. Fleckenstein, Matthias & Longstaff, Francis A., 2020. "The US Treasury floating rate note puzzle: Is there a premium for mark-to-market stability?," Journal of Financial Economics, Elsevier, vol. 137(3), pages 637-658.

    More about this item

    Keywords

    GCF Repo; tri-party repo reforms; financial intermediation;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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