Intermediation and Pricing in Tri-Party Repo Market

Abstract

We investigate how tri-party repo transactions are intermediated and priced in the post-crisis period using proprietary transaction-level data of all tri-party trades. Computing the daily average repo rate and borrowing amount, we show that the non-primary dealers that are less active in general tri-party market pay higher borrowing rate than U.S. and foreign primary dealers that are more active. The repo volume of foreign primary dealers decrease sharply at quarter ends because of regulation-induced balance sheet reductions, which may constrain their intermediation capacity between general tri-party repo market and GCF market. The repo volume of U.S. primary dealers increase at quarter ends, but the associated repo rate shoots higher, which may hinder their intermediation capacity henceforth.