07 November 2016
New York
Reporter: Drew Nicol

NY Fed may publish three repo rates

The Federal Reserve Bank of New York has confirmed it is considering publishing three new benchmark rates based on overnight repo trades as a way of improving market transparency.

The proposed rates will launch by late 2017 or early 2018 and will be primarily based on transaction-level data from various segments of the repo market, including triparty repo clearing platforms, which may only mean BNY Mellon within the next few years.

The second rate would be based on the same triparty repo data, along with Depository Trust & Clearing Corporation’s General Collateral Financing Service, but would not include the New York Fed’s transactions in the repo market.

The third rate would mirror the second but would include the New York Fed’s overnight open market operations in the repo market.

According to the New York Fed, each benchmark repo rate would be calculated as a volume-weighted median of trades, in line with the calculation of the effective federal funds rate and overnight bank funding rate. Additional summary statistics, such as transaction volume and measures of dispersion, would accompany the publication.

“[The initiative] is intended to improve transparency of the repo market by increasing the amount and quality of information available about the market for overnight treasury general collateral repo,” explained the New York Fed in a statement on the plan.

The New York Fed is expecting to work with the US Treasury’s Office of Financial Research, along with the Federal Reserve, during the finalisation of the rates.

There will also be an opportunity for the New York Fed to receive public comment prior to the final publication plan.

“With this in mind, one or more of the rates could be modified over time, as appropriate, to incorporate additional data sources, such as information on bilateral repo transactions.”

“In the construction and publication of these benchmark repo rates, the New York Fed will endeavor to adopt policies and procedures consistent with best practices for financial benchmarks, to the extent appropriate.”

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