OFR aims to ‘close the blind spot’ for regulators on repos with data offered voluntarily

A new effort on studying the non-centrally cleared bilateral segment of the repurchase agreement (repo) market – and permanently filling an “information gap” within the market – is now underway by the Treasury’s financial analytical arm, the group’s director said in a statement Monday.

James Martin, acting director of the Treasury’s Office of Financial Research (OFR), issued the statement as a follow-up to a presentation his office offered last week to the Financial Stability Oversight Council (FSOC), the group that counts leaders of all federal financial institution and financial markets regulator and is chaired by the Treasury secretary.

“Repurchase agreements are critical in our financial system’s money and securities markets,” Martin said. “High-quality data are essential to assess and monitor risks in these markets, but historically little data has been available on bilateral repo activities. The OFR closed part of this data gap in 2019 by collecting data on centrally cleared transactions and has now turned its attention to the non-centrally cleared bilateral segment.”

However, Martin said, a new effort is now underway to “close the blind spot” for regulators of the repo market where repo transactions are conducted between two firms without the involvement of a central counterparty or tri-party custodian.

“Earlier this year, the OFR went directly to the industry to learn more about this opaque market,” Martin said. “We engaged in a series of discussions about how non-centrally cleared bilateral trades are conducted and documented.

“As such, we are gathering data on non-centrally cleared bilateral repo transactions from nine institutions who volunteered to submit their data over three business days in June,” he said. “This work represents the first step toward permanent data collection by the OFR in this crucial market segment.”

OFR Continues Efforts to Fill Key Gap in Financial Data

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