Taking Stock 

Liquidity, complacency and the US mid-terms

Liquidity, complacency and the US mid-terms

A few weeks back we mused on the risks posed by JPMorgan’s decision to curtail its clearing and settlement services for the US market in repurchase agreements (repos). The fear is that any disruption to the repo market, a major source of liquidity in US security markets, could become prolonged, or perhaps intractable, with a solitary provider of clearing services in operation (ie. BNY Mellon). Any such disruption to this trade would, at the very least, give rise to marked short-term volatility in US equity markets, along with pass-through effects to other bourses worldwide. The difficulty of setting up complex clearing operations explains why some regulators and politicians in the EU27 are having second thoughts about forcing multinationals to relocate their euro-denominated clearing services away from London, in favour of locales that fall under European Union jurisdiction.    

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