Office of Financial Research Releases Proposal to Collect Data on Certain Repo Transactions

Contact: OFR Public Affairs

WASHINGTON – The Office of Financial Research today proposed a rule to improve transparency in the U.S. repurchase agreement market. The Office proposed collecting daily transaction level data from certain financial companies on their non-centrally cleared bilateral repurchase agreement trades.

“This initiative to provide better visibility into this opaque financial market segment is vital to helping ensure financial stability. When significant stress on U.S. Treasuries spilled into the repo market in March 2020, regulators didn’t have full insight into the segment of the repo market where participants were most active, namely the non-centrally cleared bilateral segment. This was due, in part, to the lack of data reported to officials on these transactions,” said James Martin, OFR’s Deputy Director of Operations. “The OFR is proposing to fill this data gap, and provide regulators with more insight into Treasury market functioning, by requiring the largest institutions in the repo market to submit data on their non-centrally cleared bilateral transactions to the OFR each day.”

Repurchase agreements are critical to the U.S. financial system’s securities and money markets. High-quality data are essential to assess and monitor risks in these markets, but historically little data has been available to regulators on bilateral repo activities. The OFR closed part of this data gap in 2019 by beginning to collect data on centrally cleared transactions and has now turned its attention to the non-centrally cleared bilateral repo market. This segment of the repo market – where repo transactions are conducted between two firms without a central counterparty or tri-party custodian – is a blind spot for regulators and is also the largest of the four repo market segments.

The Financial Stability Oversight Council, among others, recommended that the OFR consider ways to obtain better data on the non-centrally cleared bilateral repurchase agreement market, an important source of leverage for hedge funds. After extensive discussions with market participants and consultations with the Council, as well as a pilot data collection initiative, the OFR chose to move forward with a permanent data collection.

Specifically, the OFR proposed that firms submit daily trade and collateral information on all outstanding non-centrally cleared bilateral repurchase agreement transactions. The OFR proposed that covered firms submit 33 data elements each day for all transactions, such as haircut, rate, and optionality. The OFR estimates approximately 40 entities, including primary and nonprimary dealers, and bank- and nonbank-affiliated dealers, will be covered by the rule if adopted.

The notice of proposed rulemaking will be published on financialresearch.gov and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposed rule in the Federal Register.

For more information, see the OFR’s Notice of Proposed Rulemaking fact sheet.

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The OFR helps promote financial stability by looking across the financial system to measure and analyze risks, perform essential research, and collect and standardize financial data principally to support the Financial Stability Oversight Council and its member agencies. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the OFR to analyze threats to the financial stability of the United States each year and provide a report to Congress with its key findings.