Repo Collateral Reuse and Liquidity Windfalls [ECB Working Papers series No 3147 & ECB Conference on Money Markets 2025, Poster session, available here]

with Sofia Marques Pereira and Victor Rodrigues-Gomes

Reuse of collateral within repo markets is key in enabling participants to meet their short-term financing needs, maintaining market efficiency, and establishing collateral valuations. In addition, part of the literature relies on the premise that some market players, in special large dealers, take advantage of their market position to obtain “liquidity windfalls” through haircut differences when reusing collateral. However, despite the importance of this mechanism for market functioning, the result is mainly theoretical, as empirical work exploring the effects of collateral reuse is scant. Through the analysis of a novel database on European Securities Financed Transactions, this study aims to help fill this gap. We show that around 11 percent of transaction volume is based on reused securities, with chains averaging three links. Besides, contrary to the liquidity-windfalls hypothesis, we find that dealers do not impose systematic haircut wedges when interposing between non-dealers.

Selected Presentations/Conferences: Eastern Finance Association (EFA) Meeting 2026, Southwestern Finance Association (SWFA) Meeting 2026

Work in progress

1) What Drives Internal Repo Markets?

with Felix Hermes, Benoit Nguyen and Davide Tomio

2) Collateral reuse chains in the European Repo Market

with Benoit Nguyen and Victor Rodrigues-Gomes and Iñaki Aldasoro

We quantify collateral reuse and measure collateral chains in the European repo market. Using transaction-level data from the Securities Financing Transaction Data Store (SFTDS), we match individual securities across successive repo transactions to trace the path each security takes through the market. Conditional on reuse, the average chain extends 2.22 nodes beyond the original collateral owner, implying a collateral multiplier of 1.35. Banks account for roughly 60% of entities at each node, confirming that reuse is predominantly a dealer-intermediated activity; non-bank financial institutions appear almost exclusively as original collateral providers. Chains span several European jurisdictions, with British entities prominent even after Brexit. We also measure the exposure that collateral chains create for the intermediaries within them: when the maturity of an initial repo precedes that of the linked reuse transaction, the intermediary must return the security before receiving it back, generating a collateral shortfall. This exposure averages 12.4 billion euros per day but spikes to 175 billion euros around quarter-ends, consistent with regulatory window-dressing amplifying fragilities in collateral markets.

3) Repo netting in SFTDS

with Victor Rodrigues-Gomes and Michael Schmidt

4) Stock Market Participation in Germany, Wealth Effects, and Monetary Policy Transmission

with Asli Mahmudova

This paper studies how stock market participation by German households shapes the transmission of equity price movements and monetary policy shocks to consumption activity and inflation. The analysis combines micro evidence from the German Household Finance and Consumption Survey (PHF) with German macroeconomic data. On the micro side, PHF balance-sheet information is used to document participation patterns and to quantify equity exposure on the extensive and intensive margins. On the macro side, local projections trace the dynamic responses of retail activity and HICP inflation to equity valuation shocks identified from Euro STOXX 50 reactions in narrow event windows around ECB policy announcements (EA-EMPD). Equity exposure is strongly concentrated at the top of the wealth distribution. Consistent with this structure, equity valuation shocks are followed by a delayed increase in retail activity at medium horizons, while inflation responses remain small and statistically indistinguishable from zero over short horizons. The results imply that the wealth channel operates in Germany but is distributionally narrow, generating modest aggregate demand effects and limited short-run inflationary pressure.

5) AI-driven peer group selection using ML and numerical data-based analysis and its implication for Corporate Finance

with Mark Wahrenburg and Marin Shalari