July 10, 2018

The U.S. Department of the Treasury's Office of Financial Research (OFR) proposed a rule to establish a data collection covering centrally cleared funding transactions in the U.S. repurchase agreement (repo) market. The proposed data collection would enhance the ability of FSOC to identify and monitor potential risks to U.S. financial stability by closing the data gap on centrally cleared repo transactions. Comments must be received by September 10, 2018.

The proposed rule would require the submission of information by central counterparties with average daily total open repo commitments of at least USD 50 billion. Although currently the Fixed Income Clearing Corporation would be the only market participant required to report if the rule went into effect, other firms could meet the eligibility criteria for reporting in the future. In drafting this proposed rule, OFR worked closely with FED, SEC, and others. FED is expected to act as OFR’s data collection agent, with required data to be submitted directly to the Federal Reserve Bank of New York. The collected data will be used as inputs to reference rates.

The proposed collection would support the calculation of certain reference rates, particularly alternatives to the U.S. dollar London Interbank Offered Rate (LIBOR), which has been used as a benchmark to set interest rates on trillions of dollars of retail mortgages, private student loans, corporate loans, derivatives, and other financial products. In the wake of LIBOR-related misconduct, LIBOR participation has declined, leaving a need by industry and regulators for an alternative reference rate. In response, FED convened the industry-led Alternative Reference Rates Committee, which selected the Secured Overnight Financing Rate (SOFR) as the preferred LIBOR alternative. Cleared repo data from the proposed collection would be used to enhance the production of the SOFR.

 

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Comment Due Date: September 10, 2018

Keywords: Americas, US, Banking, Securities, Repo, CCP, Data Collection, FED, OFR

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