Want to understand why the Federal Reserve always causes turbulence in the markets? You need to first understand the logic behind repurchase agreements.

The Fed's repurchase (Repo) operations are essentially a "borrowing" tool used by the New York Fed—either injecting money into the market through outright repos or withdrawing it via reverse repos. The sole purpose is to stabilize short-term interest rates and prevent the federal funds rate from fluctuating wildly.

How do they stabilize? Using three tools:

**SRF (Standing Repo Facility)** is the ceiling, preventing interest rates from soaring. When the market lacks liquidity, banks can borrow here, capping the rate at the upper limit.

**ON RRP (Overnight Reverse Repurchase Agreement)** is the floor, preventing rates from falling too sharply. Wealthy institutions can park funds here, ensuring the floor rate doesn't drop too low.

**FIMA Repo Facility** is the international version, stabilizing the global dollar funding market and preventing dollar liquidity tensions from spilling over.

These three tools operate in rotation daily, and emergency measures can be added when necessary. For traders, these operations directly influence market risk appetite—liquidity easing usually lifts crypto assets, while tightening puts pressure on risk assets. Keeping an eye on the Fed's actions can essentially help predict the next market rhythm.