Collection of data on certain repurchase agreement (repo) transactions was proposed Thursday by the Treasury’s financial research arm with an aim at improving transparency, the agency said.
The Office of Financial Research (OFR) said it proposed rule to collect daily transaction level data from certain financial companies based on their non-centrally cleared bilateral repo trades.
According to James Martin, OFR’s deputy director of operations, the proposal would result in “better visibility into this opaque financial market segment,” which he said 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,” Martin said.
He asserted that the proposed rule would work to fill the “data gap” by providing regulators with more insight into Treasury market functioning and requiring the largest institutions in the repo market to submit data on their non-centrally cleared bilateral transactions to the OFR each day.
Specifically, according to OFR, the proposal requires firms to submit daily trade and collateral information on all outstanding non-centrally cleared bilateral repo transactions. That would include submission of 33 data elements each day for all transactions, such as haircut, rate, and optionality. OFR said it estimates that approximately 40 entities, including primary and nonprimary dealers, and bank- and nonbank-affiliated dealers, will be covered by the rule if adopted.
The impetus for the proposal, according to the OFR, comes from the Financial Stability Oversight Council (FSOC), among others, which recommended that the OFR consider ways to obtain better data on the non-centrally cleared bilateral repo market, widely used as leverage by 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,” the agency said.