Key Mechanics of the U.S. Tri-Party Repo Market (with Lofchie Comment)

A recent study published in the FRBNY Economic Policy Review concludes that the collateral allocation and "unwind" processes are contributing to the market's fragility and inhibiting reform. The study report suggests that improving the collateral allocation process and eliminating the time gap between the "unwind" and "rewind" of repos could help reduce weaknesses in the market and limit systemic risk.

Lofchie Comment: Tri-party repo has been one of the constant topics of discussion as a source of systemic risk. It was, for example, highlighted in FSOC's first annual report.

View report here (links externally to NY Fed website).