Text Tomura, Hajime A Note on Central Counterparties in Repo Markets 10.34989/sdp-2012-4 1 online resource (iii, 19 pages) The author introduces a central counterparty (CCP) into a model of a repo market. Without the CCP, there exist multiple equilibria in the model. In one of the equilibria, a repo market emerges as bond dealers and cash investors choose to arrange repos in an over-the-counter bond market. In another equilibrium, the repo market collapses due to aggregate cash shortage for dealers. Introducing a CCP into the repo market blocks the latter equilibrium. This stabilizing effect of a CCP is robust to idiosyncratic default risk of dealers and asymmetric information about the risk. Financial markets; Financial stability; Payment clearing and settlement systems; Marchés financiers; Stabilité financière; Systèmes de compensation et de règlement des paiements; Bank of Canada

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