Repository definition investopedia forex

There are two ways in which these purchases are different from QE: QE was designed, in part, to reduce long-term interest rates in order to encourage borrowing and economic growth and to spur more risk-taking, by driving investors into stocks and private bonds. Instead, it is buying assets for the sole purpose of injecting liquidity into the banking system. By buying long-dated assets, the Fed helped persuade investors that it meant what it said about keeping rates lower for longer than might otherwise have been the case here , here , here , and here.

The Fed has also been conducting daily and long-term repo operations. Given that short-term interest rates are closely linked, volatility in the repo market can easily spillover into the federal funds rate. What else is the Fed considering? The Fed is considering the creation of a standing repo facility, a permanent offer to lend a certain amount of cash to repo borrowers every day. It would put an effective ceiling on the short-term interest rates; no bank would borrow at a higher rate than the one they could get from the Fed directly.

Yet few observers expect the Fed to start up such a facility soon. Some fundamental questions are yet to be resolved, including the rate at which the Fed would lend, which firms besides banks and primary dealers would be eligible to participate, and whether the use of the facility could become stigmatized.

How has the growing federal deficit contributed to strains in the repo market? When the government runs a budget deficit, it borrows by issuing Treasury securities. The additional debt leaves primary dealers—Wall Street middlemen who buy the securities from the government and sell them to investors—with increasing amounts of collateral to use in the repo market. Since these increased deficits are not the result of countercyclical policies, one can anticipate continued high supply of Treasuries, absent a significant shift in fiscal policy.

In addition, the marginal purchaser of the increased supply of Treasuries has changed. Until the last couple of years, the Fed was buying Treasury bonds under its QE monetary policy. And, prior to the tax changes, U. Today, though, the marginal purchaser is a primary dealer. This shift means that those purchases will likely need to be financed, at least until end investors acquire the Treasuries, and perhaps longer.

Together, these developments suggest that digesting the increased supply of Treasuries will be a continuing challenge, with potential ramifications for both Fed balance sheet and regulatory policies. As a result, when the Treasury receives payments, such as from corporate taxes, it is draining reserves from the banking system.

The TGA has become more volatile since , reflecting a decision by the Treasury to keep only enough cash to cover one week of outflows. This has made it harder for the Fed to estimate demand for reserves. Are any financial regulations contributing to the problems in the repo market? The short answer is yes — but there is substantial disagreement about how big a factor this is. Banks and their lobbyists tend to say the regulations were a bigger cause of the problems than do the policymakers who put the new rules into effect after the global financial crisis of The intent of the rules was to make sure banks have sufficient capital and liquid assets that can be sold quickly in case they run into trouble.

These rules may have led banks to hold on to reserves instead of lending them in the repo market in exchange for Treasury securities. An increase in the systemic score that pushes a bank into the next higher bucket would result in an increase in the capital surcharge of 50 basis points. So banks that are near the top of a bucket may be reluctant to jump into the repo market even when interest rates are attractive. Central banks use reverse repos to add money to the money supply via open market operations.

Reverse repurchase agreements RRPs are the buyer end of a repurchase agreement. Reverse repos are commonly used by businesses like lending institutions or investors to lend short-term capital to other businesses during cash flow issues. In essence, the lender buys a business asset , equipment or even shares in the seller's company and at a set future time, sells the asset back for a higher price.

The higher price represents the interest to the buyer for loaning money to the seller during the duration of the deal. The asset acquired by the buyer acts as collateral against any default risk it faces from the seller. Short-term RRPs hold smaller collateral risks than long-term RRPs as over the long term, assets held as collateral can often depreciate in value, causing collateral risk for the RRP buyer. The RRP transaction is used less often than a repo by the Fed, as a repo puts money into the banking system when it is short, whereas an RRP borrows money from the system when there is too much liquidity.

The Fed conducts RRPs in order to maintain long-term monetary policy and ensure capital liquidity levels in the market. Notably, the Fed describes these transactions from the viewpoint of the other party, not their own viewpoint. In a Fed RRP, they are the ones selling securities and the other party is purchasing the securities.

Special Considerations Part of the business of repos and RRPs is growing, as third-party collateral management operators are providing services to develop RRPs on behalf of investors and provide quick funding to businesses in need. As quality collateral is sometimes difficult to find, businesses are taking advantage of these assets as a quality way to fund expansion and equipment acquisition through the use of triparty repos, resulting in RRP opportunities for investors.

This section of the industry is known as collateral management optimization and efficiency.

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Trading volume in the forex market is generally very large. Historically, foreign exchange market participation was for governments, large companies, and hedge funds. In today's world, trading currencies is as easy as a click of a mouse and accessibility is not an issue. Many investment companies allow individuals to open accounts and trade currencies through their platforms. This is not like a trip to a foreign exchange kiosk. The process is entirely electronic with no physical exchange of money from one hand to another.

Rather, traders are taking a position in a specific currency in the hope that there will be some upward movement and strength in the currency that they're buying or weakness if they're selling so that they can make a profit. Forex Market vs. Other Markets There are some fundamental differences between foreign exchange and other markets.

First of all, there are fewer rules, which means investors aren't held to strict standards or regulations like those in the stock, futures, and options markets. There are no clearing houses and no central bodies that oversee the forex market.

Second, since trades don't take place on a traditional exchange, there are fewer fees or commissions like those on other markets. Next, there's no cutoff as to when you can and cannot trade. Because the market is open 24 hours a day, you can trade at any time. Finally, because it's such a liquid market, you can get in and out whenever you want and you can buy as much currency as you can afford.

Types of Forex Transactions Forex traders transact in one of three distinct marketplaces: the spot, the forward, or the futures market. The spot rate is the current exchange rate. A transaction in the spot market is an agreement to trade one currency for another currency at the prevailing spot rate. Spot transactions for most currencies are finalized in two business days. The major exception is the U.

The price is established on the trade date, but money is exchanged on the value date. Role of the U. Dollar The U. Trading pairs that do not include the dollar are referred to as crosses. The most common crosses are the euro versus the pound and the euro versus the yen. The spot market can be very volatile.

Movement in the short term is dominated by technical trading, which bases trading decisions on a currency's direction and speed of movement. Longer-term changes in a currency's value are driven by fundamental factors such as a nation's interest rates and economic growth.

The Forex Forward Market A forward trade is any trade that settles further in the future than a spot transaction. The forward price is a combination of the spot rate plus or minus forward points that represent the interest rate differential between the two currencies. Most forward trades have a maturity of less than a year in the future but a longer term is possible. As in the spot market, the price is set on the transaction date but money is exchanged on the maturity date.

A forward contract is tailor-made to the requirements of the counterparties. They can be for any amount and settle on any date that is not a weekend or holiday in one of the countries. Forex Futures Unlike the rest of the foreign exchange market, forex futures are traded on an established exchange, primarily the Chicago Mercantile Exchange.

Forex futures are derivative contracts in which a buyer and a seller agree to a transaction at a set date and price. This type of transaction is often used by companies that do much of their business abroad and therefore want to hedge against a severe hit from currency fluctuations.

It also is subject to speculative trading. As a result, the trader bets that the euro will fall against the U. Over the next several weeks the ECB signals that it may indeed ease its monetary policy. That causes the exchange rate for the euro to fall to 1. The difference between the money received on the short sale and the buy to cover it is the profit. Had the euro strengthened versus the dollar, it would have resulted in a loss. There are also built-in security features such as anti-malware design and an authentication system to protect users.

In theory, a genuine user should be able to log into a safe environment, find specific software or code resources, and get them for interacting with the software system as a whole. Hosted software repos such as GitHub , BitBucket, and SourceForge can be used when a company is creating a software repository for proprietary or open-source products. What is the need for repositories?

Fast-Track Decision-Making Using data repos is a great way to consolidate data that is critical to operations. This allows for quick access to data for fast-track decision-making. It also helps streamline reporting and analysis. Debugging and Testing Repositories can make code testing and debugging easier, as they allow users to query or add data from the database to the application without needing to hard-code that dependency into the code. Version Control and Comparison A repository can be used in version control systems to store metadata for directory structure or a set of files.

A repo can also be used to compare versions as it stores a history of changes made to the stored data. Types of data repositories Content Repository: A content repo is a database of digital content, such as documents, digital assets, images, video, audio, and more. A well-known example of a content repository is a content management system CMS stored on file servers. Disciplinary Repository: A disciplinary repo contains data related to a particular subject area.

It often includes work from academic scholars who specialize in that subject area. A disciplinary repository accepts work from scholars that contain data or work associated with that particular subject matter. Information repository: Information repos can have a broader meaning; however, relating to IT, it refers to a digital space that keeps and maintains data in an organized way.

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