Speaking at the Big Data in Finance Conference in Michigan, OFR director Richard Berner, reassured market participants that “any new data collection minimises the burden on firms providing the data, while maximising benefits”.
Berner explained that the need for greater reporting on the repo market as was due to the continued risk of runs and asset fires sales that were seen during the financial crisis.
The US bilateral repo market is worth $1.8 trillion of the overall $4.4 trillion value of the securities financing markets.
According to Berner, the OFR will pursue a “cooperative approach” to its data collection initiative, which would involve market participants and other regulators.
“We also consider what other datasets exist on the servers of our sister agencies that are necessary for better stability monitoring. We work closely with fellow regulators to figure out who has what,” he stated.
At the same time, however, Berner highlighted the OFR’s power to impose subpoenas on uncooperative entities.
“A subpoena is a great tool to have in the toolkit. It enhances our power to persuade. Someone recently said to me that you can learn a lot more from a subpoena than you can from a regression analysis,” he added.
“Of course, this tool must be used judiciously. A subpoena carries costs—to the reputation of the organisation and through the sometimes time-consuming process of judicial enforcement.”
The OFR’s repo data collection comes as part of a series of initiatives to better map all securities financing markets, and will run in tandem to similar project for the securities lending industry, which saw its first pilot data survey completed in August.
Seven agent lenders reported approximately $1 trillion in outstanding daily loans over separate three days, to provide a snapshot of their securities lending activity.
Speaking at the same event, the Securities and Exchange Commission's (SEC) Kara Stein stated: “Data and technology present tremendous opportunities and benefits—but they have also opened the door to new and exceedingly complicated risks.”
“Data is distributed across a range of electronic platforms, complicating the task of monitoring and examining market participants.”
Commissioner Stein went on to reiterate the need for the creation of an Office of Data Strategy as part of the SEC’s data collection and analysis strategy going forward.
“The office would be responsible for coordinating the creation of a data strategy addressing how we collect, manage, use, and provide data. This is a critical next step in turning our ad hoc growth as data users into a deliberate plan. The office could lend its expertise to, and would coordinate with, our policy, exam, and enforcement offices. Having a data strategy, and a team dedicated to it, is especially important in light of our limited resources.”