Repo market to implement penalty rate for failed trades

01/6/2009 | Financial Times (free content)

The Treasury Market Practices Group announced that fines will be introduced for failed trades in the repurchase market. The penalties will be implemented because of recent operational problems in the market and reductions in official interest rates toward 0%. "The proposal to create explicit penalties for settlement fails tends to produce the most visceral response from market participants," said Lou Crandall, an economist at Wrightson Icap. "However, it is also the most straightforward way to remedy the obvious structural flaws that lead to delivery logjams in today's market."

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