Central clearing in the repo market could increase risks
The US Office of Financial Research (OFR) has said central clearing in the repurchase agreement (repo) market will drive up risks to the central clearing counterparties (CCPs) involved even though there will be benefits to dealers and their clients.
The OFR's report notes that recent regulatory changes have raised the cost of participating in the repo market for bank-affiliated dealers, with many transactions between dealers now being centrally cleared.
Further expanding the use of central clearing to transactions between dealers and non-dealers could,
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