Groundwork to fill a data gap about inner workings of non-centrally cleared bilateral repurchase agreements (repos) is now being prepared through a data collection that will ultimately lead to a final rule, the Treasury Department’s financial research office said Wednesday.
In a blog post, the Treasury’s Office of Financial Research (OFR) said it has started a data collection pilot program with nine institutions. The program, the OFR said, is designed to prepare industry participants and the OFR “for a permanent data collection under a Final Rule, which will capture data on an ongoing basis across all market participants.”
The effort, according to the OFR, is spurred by “years” of regulators calling for greater insight and transparency into the non-centrally cleared bilateral segment of the repo market. The agency said the transactions – which are conducted between two firms without the involvement of a central counterparty or custodian, unlike a typical repo where a bank or other custodian may hold the securities in the transaction – “has been a particular blind spot for regulators.”
“Unlike other repo segments where information and data are regularly published, the wholly bilateral nature of these transactions means there is no central source of data on this segment of the repo market,” the OFR blog post stated.
Additionally, the OFR said its research has found that blind spots in repo markets have become more acute with recent events of repo market disruptions in September 2019 and March 2020. “Expanding visibility into the non-centrally cleared bilateral repo market will be a critical step toward filling this blind spot,” the OFR asserted.