Seems as if JPMorgan is exiting its role as one of two clearers for the tri party repo market by the end of next year, leaving Melon Bank as the only clearing house for US government securities. I don't know what to make of this. The repo market clears about $504 billion of US government securities per day and is where short term borrowing is done. It's also one of the market that freezes the financial system if they get runs on the collateral posted within it or the participants stop trusting each other. It is often alleged by people critical of the system that short term funding obtained by participants in this market finds its way to finance longer term bets in the bond markets where the central banks provide the constant windfall gains to the speculators that somehow manage to transform the duration of the money out of the repo market. I've never seen a credible explanation of how they manage to affect this duration transformation. ie borrow money on the short term and bet it on the long term so I don't know if it is happening or not.
Interesting however that JPMorgan is pulling the pin on clearing these transactions. I wonder if they know something? With $504 billion worth of transactions per day surely its a money spinner particularly if there are only two clearing banks in the market. Eshmun
