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BNY Mellon to Control Majority of Repo Clearing Transactions as JPMorgan Exits Business

JPMorgan is expected to complete its transition out of the repo clearing business by the end of 2017 and is currently transferring clients to BNY Mellon. Bloomberg is reporting that BNY Mellon is poised to become the sole company responsible for ensuring that almost two trillion dollars of securities financed by repos are cleared and settled daily and that the BNY Mellon “monopoly” is creating concerns among traders and others who fear that in age of risk mitigation it is healthier to have more than one clearing firm. A representative of BNY Mellon told Bloomberg that the company is preparing for larger capacity and is investing more in back-up, capacity, technology, processes and people. Last year, the Wall Street Journal reported that JPMorgan will no longer settle Treasury and agency bonds through its U.S. broker-dealer arm for certain banks and brokers that use JPMorgan as a third party to settle trades on their behalf. Repurchase agreements, or repos, support liquidity in the government securities market and facilitate trading in assets such as stocks, bonds and currencies. Securities dealers use repos to borrow funds on a collateralized basis, to provide funding to others, and to borrow or lend specific securities using cash as collateral.