What’s behind the decline in tri-party repo trading volumes?

What’s behind the decline in tri-party repo trading volumes?

At its peak, around $2 trillion worth of securities changed hands daily in the tri-party repo market, where borrowers pledge their securities as collateral for the cash they want to borrow. The market value of the securities involved in these deals (i.e., the total collateral value) rose steeply after 2011, peaked toward the end of 2012, and then fell steeply. Federal Reserve Bank of Cleveland researchers Mahmoud Elamin and William Bednar say an increase in Fed purchases and holdings of agency securities might have been responsible for some of the decline in the volume of agency securities traded in the tri-party repo market.

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Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892