Lehman Brothers Holdings Inc. (fka LEHMQ)

[sidhe_south]

Fed Plans Changes To Repo Markets: FT.com

http://www.rttnews.com/Content/BreakingNews.aspx?Id=985519&Category=Breaking%20News&SimRec=1&Node=

6/22/2009 10:35 AM ET
The US Federal Reserve is considering significant changes to the repurchase, or repo, markets where banks around the world raise overnight dollar loans, the FT.com reported on Sunday. Citing people familiar with the matter, the report said that the Fed's plans include creating a utility to replace the Wall Street banks that handle transactions.

According to the report, Fed officials plan to meet next month with market participants to discuss reforms. The Fed hopes to have a new repo system in place by October, when its credit facility for securities companies is to close, the FT.com noted.

The Fed's deliberations are partly motivated by concerns that the structure of the US overnight repurchase market may have exacerbated the financial turmoil that accompanied the failure of Lehman Brothers (LEHMQ.PK) in September last year.

The report also stated that the Fed is looking into the creation of a mechanism to replace the clearing banks, the biggest of which are JPMorgan Chase & Co. (JPM) and Bank of New York Mellon Corp. (BK), that serve as intermediaries between borrowers and lenders.

In the repo markets, borrowers such as banks pledge collateral in return for overnight loans from lenders such as money market funds. The clearing banks stand between the parties, providing services such as valuing the collateral and advancing cash during the hours when trades are being made and unwound. The Fed offici