How Central is Central Counterparty Clearing? A Deep Dive into a European Repo Market During the Crisis

38 Pages Posted: 21 Jun 2016

See all articles by André Ebner

André Ebner

Deutsche Bundesbank

Falko Fecht

Frankfurt School of Finance & Management

Alexander Schulz

Deutsche Bundesbank

Date Written: 2016

Abstract

Repo markets offering central counterparty (CCP) clearing and anonymized trading were remarkably resilient during the recent crises. We use the full transaction level dataset on all repo trades on Eurex Repo, including identifiers for market participants, to provide a detailed description of the market's development and microstructure during the crises and under different monetary policy interventions. Overall, we find high excess liquidity being associated with lower private liquidity provision in this market. Cross-segment arbitrage and market making is limited but growing steadily. The reallocation of liquidity risk across banks within this market varies substantially with the general market conditions.

Keywords: repo, central counterparty, market microstructure, financial crisis

JEL Classification: G2, D4, E58

Suggested Citation

Ebner, André and Fecht, Falko and Schulz, Alexander, How Central is Central Counterparty Clearing? A Deep Dive into a European Repo Market During the Crisis (2016). Bundesbank Discussion Paper No. 14/2016. Available at SSRN: https://ssrn.com/abstract=2797087

André Ebner (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Falko Fecht

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Alexander Schulz

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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