From the Collaborative Bond and Money Market Data Portal Definition: Securities Financing Transactions (SFTs) refer to a broad category of collateralised transactions in which securities are temporarily exchanged or pledged to obtain funding, acquire specific assets, or facilitate market-making. The principal forms include repurchase agreements (repos), securities lending and borrowing, sell/buy-back arrangements, and margin lending. As the foundational plumbing of modern capital markets, SFTs provide the mechanism through which dealers finance inventory, central banks transmit monetary policy, and institutional investors extract incremental yield, all based on the obligation to return equivalent assets at a future date. Effects on bond and money markets: Short-Term Funding and Price Discovery: SFTs serve as the primary channel for dealers and leveraged investors to finance bond positions, with repo rates acting as a real-time barometer of supply-demand imbalances that directly influence broader yield curve pricing. Liquidity Transformation and Collateral Velocity: By enabling the same security to be re-used across multiple transactions (rehypothecation), SFTs multiply the effective supply of high-quality collateral, compressing funding costs and deepening secondary market liquidity. Monetary Policy Transmission: Because central bank open-market operations are overwhelmingly conducted via repos, the SFT market acts as the critical first link in the chain connecting policy rates to real-economy borrowing costs. Regulatory and market-structure implications: Procyclical Leverage and Fire-Sale Dynamics: SFTs enable the rapid build-up of leveraged positions that, during periods of stress and tightening margin requirements, can force simultaneous deleveraging and trigger destabilising fire-sale spirals in sovereign markets. Counterparty and Settlement Risk: The temporary nature of these transactions creates rolling counterparty credit exposures that can cascade systemically if securities or cash fail to settle, particularly across un-cleared or highly intermediated lending chains. Collateral Scarcity and Market Fragmentation: Increasing regulatory demand for high-quality liquid assets (HQLA) under Basel III has intensified competition for eligible SFT collateral, creating structural scarcities that can periodically distort repo rates and complicate central bank policy implementation.