Repo Intermediation and Central Clearing: An Analysis of Sponsored Repo

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Staff Reports

Repo Intermediation and Central Clearing: An Analysis of Sponsored Repo

Number 1140
December 2024

JEL classification: G12, G23

Authors: Adam Copeland and R. Jay Kahn

This paper evaluates the salient forces behind a dealer-intermediary’s decision to move a bilateral repo transaction with a customer into central clearing. We provide evidence that dealers turn to sponsored repo on occasions when balance sheet space is scarce, such as when there is a large issuance of Treasury coupon securities and end-of-month dates. We also find that sponsored repo spreads tend to be affected by a range of factors, with the three largest drivers being money market fund assets, a proxy for hedge fund demand for repo funding, and end-of-month dates.

Full Article

Author Disclosure Statement(s)

Adam Copeland
Adam Copeland declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

R. Jay Kahn
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Suggested Citation:
Copeland, Adam, and R. Jay Kahn. 2024. “Repo Intermediation and Central Clearing: An Analysis of Sponsored Repo.” Federal Reserve Bank of New York Staff Reports, no. 1140, December. https://doi.org/10.59576/sr.1140

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