Fed is considering to remove repo regulating banks

According to the Financial Times report, the Federal Reserve is looking into creation of a utility to replace the Wall Street banks such as JPMorgan Chase and Bank of New York Mellon that handle U.S. repo market transactions, and plans to meet next month with market participants to discuss reforms.

The proposal is partly motivated by concerns that the structure of the U.S. overnight repurchase market may have made the financial turmoil more intense that followed the crash of Lehman Brothers in September have partly motivated the proposal.

Besides, one of the questions raised by the Fed is to find out whether the system really protects the interests of all participants, said a person familiar with the Fed's thinking quoted by the FT.

According to the paper, Fed officials are afraid that existing arrangements put the clearing banks in a difficult position in a crisis and hope to have a new repo system in place by October, when its credit facility for securities companies is to close.