The impact of CCPs' margin policies on repo markets

BIS Working Papers No 515
October 2015

This paper quantifies the impact on the cost of funding in repo markets of the initial margins applied by central clearing counterparties (CCPs). We use contract-level data on the general collateral (GC) segment of Italy's MTS Repo market between January 2011 and April 2014. The analysis shows that the initial margins, paid by all participants, had a positive and significant effect on the cost of funding. Such an impact is consistent across different model specifications and data subsamples.

JEL classification: E43, G01, G10

Keywords: repurchase agreements, central clearing counterparties, margin policies