Although the repurchase agreement market has been traditionally between large institutional investors and major investment banks, new technology is emerging that will allow smaller players with less capital to take advantage of this short-term collateralized lending/investment market.

Deposit Software Inc. (DSI) has developed software and a servicing center that allows small-and medium-sized banks and their corporate customers, which generally don't have the volume of capital to open up repo accounts themselves, the ability to aggregate their funds with other institutions so that they can get into the market. "This system will aggregate the smaller balance of funds from a lot of smaller institutions and send that information to a Lehman or Goldman. So instead of dealing with 20 or 50 firms, (the major investment banks) deal with one transaction at the end of the day which is collateralized in bulk," says Larry Tabb, The Tower Group's senior analyst of securities and investments.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.