FICC Market Structure & Liquidity Strategy Monthly Insights

Research evidence excerpt

FICC Market Structure & Liquidity Strategy Monthly Insights

Sales & Trading

FICC Market Structure & Liquidity Strategy J P M O R G A N

13 July 2026

Source: Federal Reserve Board, 2026.

In its evaluation of the basis trade, the note emphasizes that while the strategy can support price discovery and liquidity provision,

it typically embeds leverage and involves interconnected exposures across Treasury cash, futures and repo that can create

challenges during stressed market conditions. According to the author, the growth in basis trade activity occurs alongside a sharp

increase in repo use, with repo cash borrowing rising to $3 trillion.

Checking in on Treasury clearing

In Treasury repo, where basis-trade leverage is typically sourced, central clearing is already operating at significant scale as the

SEC’s Treasury clearing mandate approaches. According to recent data analysis published by the International Swaps and

Derivatives Association (ISDA), total cleared repo average daily volume reached $6.4 trillion, with sponsored repo activity

reaching $2.4 trillion.[4]

On June 18, the SEC granted conditional exemptive relief from the Treasury clearing requirement for certain inter-affiliate repo

transactions between a private fund and its captive clearing subsidiary that is a direct participant of a U.S. Treasury clearinghouse.

[5]The relief responds to a request from the Managed Funds Association, which argued[6] it is necessary to allow private funds to

self-clear through a subsidiary without those internal-facing repos being treated as clearable eligible secondary market

transactions. The exemption is narrowly scoped to repo transactions between the fund and the captive clearing subsidiary and is

intended to reduce implementation friction as clearing access models evolve.