Accessible Version
Accessible Version
Figure 1
Bilateral and Centrally Cleared Networks
The figure consists of a left panel and a right panel. Each panel contains a circular diagram composed of several solid circles and many arrows.
The left panel shows a diagram of a bilaterally cleared network. In the diagram, solid circles of various sizes and single-direction arrows form a mesh pattern. Each circle is one of two colors: One color indicates protection buyers, and the other indicates protection sellers. Single-direction arrows create several interconnections within the pattern, with a greater concentration of circles and arrows toward the center. The larger circles are approximately in the center of the diagram. The arrows connected to the circles representing sellers point toward the center, and the arrows connected to the circles representing buyers point away from the center.
The right panel shows a diagram of a centrally cleared network. In the diagram, solid circles of various sizes and single-direction arrows are arranged in a hub-and-spoke pattern. Each circle, with a single exception, is one of two colors (one color for protection buyers and the other for protection sellers); the exception is the small circle at the center, which is a third color. Single-direction arrows connect each circle to the center circle, which represents the central counterparty. The arrows connected to the circles representing sellers point toward the center, and the arrows connected to the circles representing buyers point away from the center.
Note: The figure on the left shows a bilateral network in the credit default swap (CDS) market for a single and highly traded CDS contract. The figure on the right shows the hypothetical network that would exist if the contract were cleared through a single central counterparty. In each figure, a red circle denotes a protection seller and a blue one denotes a protection buyer. The size of the circle represents the amount of protection bought or sold.
Source: Depository Trust & Clearing Corporation.
Figure 2
Direct Links between LISCC Banks and Global CCPs
The figure illustrates the network between banks in the portfolio of the Large Institution Supervision Coordinating Committee (LISCC) and central counterparties (CCPs). The figure displays three columns of graphics. The left column displays circles of one color, each of which represents one CCP. The middle column displays circles of a different color, each of which represents one bank in the portfolio of the LISCC. The right column displays circles of the same color as in the first column, and each circle represents one CCP. A number of lines connect each circle in the middle column (a LISCC bank) with many circles in the right and left columns (CCPs). Each connection indicates the relationship between a member bank and the CCP.
Note: The figure illustrates the network between banks in the portfolio of the Large Institution Supervision Coordinating Committee (LISCC), represented by blue circles, and central counterparties (CCPs), represented by red circles. Each connection indicates the relationship between a member bank and the CCP.
Source: Federal Reserve Board.
Figure 3
A Map of the U.S. Repo Market
The figure illustrates the linkages in the bilateral and tri-party repo markets in the United States. The upper portion of the figure illustrates the bilateral market and the lower portion illustrates the tri-party market, with text boxes listing the main cash providers to the market on the left and the main cash borrowers on the right. In the middle of the figure is a text box listing securities dealers and representing them as borrowers, lenders, and intermediaries in both markets.
In the bilateral market, cash providers are asset managers and other financial institutions. There are arrows showing them providing cash to securities dealers and receiving securities from the dealers in a typical bilateral repo transaction. Cash borrowers are prime brokerage clients and other financial institutions. There are arrows showing them borrowing cash from securities dealers and providing securities to the dealers in a typical bilateral repo transaction. There are arrows to and from the securities dealers, showing that dealers can lend or borrow amongst themselves in this market.
In the tri-party market, cash providers are money market mutual funds, securities lenders, and other financial institutions. There are arrows showing them providing cash to securities dealers and receiving securities from the dealers in a typical tri-party repo transaction. There are also arrows to and from the securities dealers in this bottom portion of the figure, showing that dealers can lend or borrow amongst themselves in the general collateral finance (GCF) portion of the tri-party market.