term and also reflecting the higher demand for short-term funding through repo by securities houses that may not have access to unsecured money. The sterling CD market has grown substantially, partly because the growth of the gilt repo and securities lending market has contributed to demand for CDs for use as collateral. One effect of gilt repo on the money market is a possible association with a reduction in the volatility of over- night unsecured rates. Fluctuations in the overnight unsecured market have been reduced since the start of an open repo market, although the evidence is not conclusive. This may be due to repo providing an alterna- tive funding method for market participants, which may have reduced pressure on the unsecured market in overnight funds. It may also have enhanced the ability of financial intermediaries to distribute liquidity.     12Securities lending is defined as a temporary transfer of securities in exchange for collateral. It is not a repo in the sense there is no sale or repurchase of securities. The use of the desired asset is reflected in a fixed fee payable by the party temporarily taking the desired asset.       To illustrate a gilt repurchase agreement, let us consider a UK gilt dealer who purchases a 7.5% coupon gilt stock (in the UK bonds are referred to as stocks) and needs financing overnight. Exhibit 8.6 pre- sents a Bloomberg Security Description screen for this security. As before, we will use Bloombergs RRRA screen to illustrate the transac- tion in Exhibit 8.7. Suppose the face amount of the position is $1 mil- lion and the notes full price (i.e., flat price plus accrued interest) is £1,163,491.80. Suppose the haircut is 2%. Accordingly, the collateral is 102% of the amount being lent. This percentage appears in the box labeled "COLLATERAL" in the upper right-hand corner of the screen. Accordingly, to determine the amount being lent, we divide the notes full price of £1,163,491.80 by 1.02 to obtain £1,140,678.04 which is labeled "SETTLEMENT MONEY" located on the right-hand side of the screen. Suppose the repo rate in this transaction is 3.9063%. Then, the dealer would agree to deliver the gilt stocks for £1,140,678.24 and repurchase the same securities for £1,140,800.32 the next day. The £122.08 difference between the "WIRED AMOUNT" of £1,140,678.24 and the "TERMINATION MONEY" of £1,140,800.32 is the sterling interest on the financing. Using a repo rate of 3.9063% and a repo term of 1 day, the sterling interest is calculated as shown below:     £122.08 = £1,140,678.24 ´ 0.039063 ´ (1/365)