Repurchase Agreements (RPs or Repos) Are A Huge Factor For Federal Reserve Bank Credit

I'm still in research mode but it looks like there's huge borrowing going on to buy index futures/options and probably also baskets of indexes' components (index fund trading I've been discussing which is a huge factor for gold/silver stocks and many other sectors) courtesy of the Fed's Open Market Operations ( http://app.ny.frb.org/markets/omo/dmm/temp.cfm ) which leads to occasional dramatic spikes in the stock market when there's a large increase in borrowing from the prior week or occasional dramatic plunges when there's a large decrease in borrowing from the prior week (Federal Reserve Bank Credit spikes or plunges http://www.federalreserve.gov/releases/h41/Current/ ). The US repo market reached USD 5 trillion (!) at the end of 2004 AND is growing at two-digit pace, which means it's growing at over $500 Million/year!, so index fund trading is becoming even more of a factor.

The US Federal Reserve and the European Repo Council (a body of the International Securities Market Association) both try to estimate the size of their respective repo markets. At the end of 2004, the US repo market reached USD 5 trillion and the European one passed EUR 5 trillion in outstandings. Both are growing at two-digit pace.

http://en.wikipedia.org/wiki/Repurchase_agreement