At least for now, moving a big slice of bilateral Treasury repo into central clearing doesn’t budge SOFR itself. It does shift the tails of the SOFR distribution a bit, hinting that the benchmark could get a bit more vol once these trades are pulled into the official rate fix.
Post‑crisis capital and liquidity rules can unintentionally drain dealer risk‑bearing capacity and make markets thinner and more fragile, especially in stress. A model of securities dealers subject to leverage, position, and liquidity constraints inspired by Basel III–style regulation shows these constraints change dealers’ willingness to intermediate trades and hold inventory, which feeds through to bid–ask spreads and market depth.
Securities‑financing markets in Canada (repos and securities lending) are the plumbing that lets a relatively small stock of government bonds support ever‑rising trading volumes.
The Canadian repo market is presented as an ecosystem, in which banks and buy‑side institutions are linked through collateralized funding on the rails of clearing, settlement, and central banking infrastructure. This guide is old but is apparently still used to train new employees at the dealers. Hmm, the Bank of Canada really should issue an update…