Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241157 
Year of Publication: 
2021
Series/Report no.: 
Staff Report No. 964
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Market disruptions in response to the COVID pandemic spurred calls for the consideration of marketwide central clearing of Treasury securities, which might better enable dealers to intermediate large customer trading flows. We assess the netting efficiencies of increased central clearing using nonpublic Treasury TRACE transactions data. We find that central clearing of all outright trades would have lowered dealers' daily gross settlement obligations by roughly $330 billion (60 percent) in the weeks preceding and following the market disruptions of March 2020, but nearly $800 billion (70 percent) when trading was at its highest. We also find that expanded central clearing would have substantially lowered settlement fails. The estimated benefits would likely be greater if dealers' auction purchases were included in the analysis or if the increased central clearing included repo transactions.
Subjects: 
Treasury securities
central clearing
dealers
market structure
COVID-19
JEL: 
G28
G18
G12
Document Type: 
Working Paper

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