flows in the uncleared (i.e. non-centrally cleared) dealer-to-customer repo market, where securities are transferred between accounts to enable secondary market trading (unlike the triparty market)
Why is it necessary to use the Fedwire settlement system when both parties to the repo have cash and securities accounts at BNY? Couldn't the trade just be settled on the books of BNY?
if both have accounts at the BNYM, that still requires a Fedwire transfer, since the security moves between the sub-accounts of BNYM’s main Fed account. (sub- accounts are official securities accounts on Fedwire managed by the BNYM). BNYM sends a message to transfer the security between sub-accounts belonging to each participant. It will use a Fedwire notification to update cash account balances (on BNYM’s system, not on the Fed’s system).
Why is it necessary to use the Fedwire settlement system when both parties to the repo have cash and securities accounts at BNY? Couldn't the trade just be settled on the books of BNY?
if both have accounts at the BNYM, that still requires a Fedwire transfer, since the security moves between the sub-accounts of BNYM’s main Fed account. (sub- accounts are official securities accounts on Fedwire managed by the BNYM). BNYM sends a message to transfer the security between sub-accounts belonging to each participant. It will use a Fedwire notification to update cash account balances (on BNYM’s system, not on the Fed’s system).