As liquidity conditions in the "repo market"--the market where broker-dealers obtain financing for their securities--deteriorated following the near-bankruptcy of Bear Stearns in March 2008, the Federal Reserve took the step of creating a special facility to provide overnight loans to dealers...

The buildup of reserves in the U.S. banking system during the financial crisis has fueled concerns that the Federal Reserve's policies may have failed to stimulate the flow of credit in the economy: Banks, it appears, are amassing funds rather than lending them out. However, a careful...

As liquidity conditions in the term funding markets grew increasingly strained in late 2007, the Federal Reserve began making funds available directly to banks through a new tool, the Term Auction Facility (TAF). The TAF provides term funding on a collateralized basis, at interest rates and...

Recent regulatory and technological changes have spurred the development of automated trading systems known as ECNs, or electronic communications networks. Proponents of the networks contend that ECNs can cut transaction costs, accelerate trade execution, and expand the price information...

With the growing appeal of cross-border trading in Europe, efforts are under way to establish consolidated exchanges that offer trading in stocks from many European countries. An analysis of these evolving pan-European exchanges suggests that consolidation could reduce the costs and...

Recent high correlations among hedge fund returns could suggest concentrations of risk comparable to those preceding the hedge fund crisis of 1998. A comparison of the current rise in correlations with the elevation before the 1998 event, however, reveals a key difference. The current increase...

The Federal Reserve collects data on the financing activities of the primary government securities dealers. Some market analysts argue that the data show a considerable rise in dealer leverage in recent years. However, a close reading of the data suggests that dealer borrowing involving...

A close look at how financial intermediaries manage their balance sheets suggests that these institutions raise their leverage during asset price booms and lower it during downturns - pro-cyclical actions that tend to exaggerate the fluctuations of the financial cycle. The authors of this study...