NY Fed Sounds Alarm Over Triparty Repo Fire Sales

Law360, New York (May 7, 2013, 8:33 PM EDT) -- Few tools exist to prevent fire sales in the triparty repo market that undergirds $1.7 trillion in transactions used by securities dealers to raise cash, posing a major threat to market stability, researchers at the Federal Reserve Bank of New York warned Tuesday.

In a 40-page report, New York Fed staffers found that no safeguards are in place to block creditors from quickly offloading securities on the cheap after a dealer defaults. Because repo contracts are immune to automatic stay of bankruptcy, creditors can immediately take...
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