For a long time, the dominant tenors for money market and FX instruments were 6 months and 3 months, and banks slowly moved to commercial trades at those tenors but funding overnight. If this is a step in the direction of increasingly short-term funding as trade frequencies and volumes increase, could banks move to continuous funding? That is, the book would be continuously balanced, excess lent continuously and funding performed continuously, with a continuously indexed swap instead of an Overnight Indexed Swap (OIS)?
One can imagine an hourly or minute-to-minute fixing in FX already.
[Update Sep 2012]: Via Deus Ex Macchiato, this from the FSOC annual report:
Currently, triparty repo trades unwind every day, meaning that the clearing bank returns cash to the lender’s account and returns collateral to the borrower’s account. Trades are not settled until several hours later. For several hours each afternoon, dealers require funding of their entire triparty repo book that lenders do not provide. This $1.7 trillion funding need is provided by two clearing banks.
This is a potentially unstable situation.
This suggests that accounts are already balanced hourly or less.
