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Mapping the interdealer European repo market

Mapping the interdealer European repo market

The European interdealer repo market can be usefully structurally differentiated at three stages of a transaction’s life: a) trading --- the negotiation and execution of transactions (the formation of contracts);  b)  clearing --- the netting by counterparties of (1) in the normal course of business, opposite obligations to deliver the same collateral security (same ISIN) to each other on the same day and opposite obligations to pay cash in the same currency to each other on the same day to produce a smaller residual delivery and payment obligation; and (2) after a default, all mutual obligations to produce a single exposure for immediate settlement --- which can be bilaterally or across a central counterparty (CCP); c) collateral management --- the selection of specific security issues to deliver as collateral and the maintenance of the value of that collateral and the processing of other events such as income payments on the collateral.[…]