28 November 2017
London
Reporter: Drew Nicol

OFR adds repo to securities financing data collection


The Office of Financial Research (OFR) is set to expand its data collection of securities financing transactions to include bilateral and cleared repo, with the first report expected in the first half of 2018.

Speaking on behalf of the OFR’s Financial Stability Oversight Council (FSOC), which is spearheading the data collection, Stacey Schreft, the OFR’s deputy director for research and analysis, said the expanded securities finance data collection would be critical for market transparency and accurate pricing.

The FSOC conducted a pilot study in partnership with the New York Federal Reserve for bilateral repo transactions in 2016 and the long-term data collection will be built of the back of this work.

A ‘notice of proposed rulemaking’ on a cleared repo collection is set to be released in H1 2018.

“From the data pilot, we estimate that bilateral repo activity constitutes about half of the repo funding of major dealers, and the majority of the funding that dealers provide to others,” said Schreft.

“Monitoring the tenor, haircuts, and rates in such repos across a broad range of collateral will help us understand the functioning of and spot stress in asset and funding markets.”

Schreft also noted that the interest rate information that the OFR collects on cleared repo transactions is “critical for the production of the Secured Overnight Financing Rate (SOFR)”.

SOFR was selected as an alternative to LIBOR by the Alternative Reference Rate Committee on 22 June. The cleared repo data will be used immediately in the publication of the SOFR.

“Thirdly, by shedding light more broadly on the specifics of repo funding, these collections will support other FSOC initiatives, such as understanding dynamics that affect liquidity in Treasury markets,” Schreft added.

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