Shadow banking: Repo CCPs, anyone?

By:
Joti Mangat
Published on:

Recommendation 10 of the Financial Stability Board’s Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos instructs local authorities to "evaluate, with a view to mitigating systemic risks, the costs and benefits of proposals to introduce CCPs [central counterparties] in their inter-dealer repo markets where CCPs do not exist. Where CCPs exist, authorities should consider the pros and cons of broadening participation."

US repo markets have not yet embraced CCPs; rather participants can trade bilaterally or via the $1.5...