23 May 2017
Find out more

Repo settlement delays expose market fragility

31 January 2013  |  4324 views  |  1 New York Skyline 1

Operational issues in the $1.87 trillion tri-party repurchase agreement market delayed settlement of some trades on Tuesday by several hours, Reuters reports.

The New York Fed was forced to extend the opening hours of its Fedwire Securities Service by two hours until 5pm to handle the backlog, reports the newswire, citing traders in the market.

The Federal Reserve has recently intensified oversight of the market in an effort to eliminate intraday credit exposures at JPMorgan Chase and BNY Mellon, the two large custodian banks that handle the settlement of loans and manage collateral between lenders and borrowers in the market.

JPMorgan Chase has recently stopped the daily unwind of non-maturing term repo trades, while BNY Mellon has been rolling out operational and technology changes to eliminate the credit risk against privately-issued, nongovernment securities that settle through the Depository Trust Company. As of Thursday, BNY Mellon dealers will be required to prefund all maturing tri-party repo transactions involving DTC-sourced collateral prior to settlement.

Both clearers will be implementing further changes in their settlement procedures over the next two years in an effort to counteract structural weaknesses in the market that were exposed during the 2008 credit crunch.

The Fed has declined to comment on today's problems, which underline the continued fragility of the market and add urgency to the central bank's reform agenda.

Comments: (1)

A Finextra member
A Finextra member | 01 February, 2013, 18:32

This is the tip of the iceberg and a example of how dangerous the market is with liquidity tight in collateral and cash.The major banks must find a netting solution between themselves

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

JPMorgan Chase slammed by regulators for control failings after botched derivatives bet

JPMorgan Chase slammed by regulators for control failings after botched derivatives bet

15 January 2013  |  5179 views  |  0 comments | 1 tweets | 1 linkedin
BNY Mellon lays off staff, institutes hiring freeze

BNY Mellon lays off staff, institutes hiring freeze

10 August 2011  |  19438 views  |  0 comments
BNY Mellon to launch e-market for European asset-backed securities

BNY Mellon to launch e-market for European asset-backed securities

08 September 2010  |  6295 views  |  0 comments
BNY Mellon launches dark pool for debt

BNY Mellon launches dark pool for debt

11 June 2010  |  8879 views  |  0 comments
Back offices buckle under OTC volume surge

Back offices buckle under OTC volume surge

23 April 2008  |  8504 views  |  0 comments
Crunch to squeeze sell side spending on technology

Crunch to squeeze sell side spending on technology

23 April 2008  |  8631 views  |  0 comments
Basel Committee calls for financial market shock treatment

Basel Committee calls for financial market shock treatment

17 April 2008  |  6243 views  |  0 comments

Related company news

 

Related company information

JPMorgan Chase

Related blogs

Create a blog about this story (membership required)
visit vasco.com/news/PSD2-compliant-solutionsDownload the paper nowvisit dh.com

Top topics

Most viewed Most shared
European banks lobby Commission to push ahead with screen scraping banEuropean banks lobby Commission to push ah...
8732 views comments | 29 tweets | 35 linkedin
Time for data-driven banking to come of ageTime for data-driven banking to come of ag...
8624 views comments | 28 tweets | 35 linkedin
Google and PayPal partner for mobile shopping by fingerprintGoogle and PayPal partner for mobile shopp...
8409 views comments | 27 tweets | 27 linkedin
Banks must get on AI bandwagon now – new Finextra researchBanks must get on AI bandwagon now – new F...
8168 views comments | 22 tweets | 30 linkedin
Twins fool HSBC voice biometrics - BBCTwins fool HSBC voice biometrics - BBC
8100 views comments | 19 tweets | 24 linkedin

Featured job

Six Figure Base + Commission + Stock Options
London

Find your next job