The U.S. Treasury Department's Office of Financial Research ("OFR") proposed a rule to require data collection that covers centrally cleared transactions in the U.S. repurchase agreement market.
The new rule would require certain U.S. central counterparties ("CCPs") to report daily on repurchase agreement ("repo") transactions. The primary purposes of the proposal are to (i) enable the Financial Stability Oversight Council ("FSOC") and the OFR to identify and monitor risks to financial stability and (ii) improve the calculations of certain reference rates, such as the Secured Overnight Funding Rate ("SOFR"). The data must be submitted directly to the Federal Reserve Board of New York as the OFR's "collection agent."
The OFR noted that "only one of the four segments of the U.S. repo market, the tri-party repo segment," is currently subject to mandatory regulatory data collection, and that other data are collected under a voluntary agreement with DTCC Solutions. The OFR asserted that the "lack of comprehensive data on repos creates material blind spots with regard to the most active short-term funding market in the U.S. financial system."
The OFR added that imposing mandatory collection of repo data from CCPs would:
- improve the oversight capability of the FSOC to identify emerging threats to the stability of the U.S. financial system;
- "support the calculation of certain reference rates," including the SOFR;
- allow the OFR, the FSOC and other member agencies to have a better understanding of "collateral flows in securities markets"; and
- ensure the long-term continuation of the SOFR and the Broad General Collateral Rate by including reporting from CCPs that "meet the $50 billion activity-based materiality threshold."
Comments on the proposal must be submitted by September 10, 2018.
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