OFR Adopts Data Collection Rule on Centrally Cleared Repo Transactions
OFR adopted a final rule to establish a data collection covering centrally cleared funding transactions in the U.S. repurchase agreement (repo) market. OFR has worked closely with FED, SEC, and others in drafting the rule. The rule will become effective from April 22, 2019. OFR also published the instructions for preparation of the report of centrally cleared transactions in the U.S. repo market. The collection is expected to begin in mid-October.
The OFR SFT-1 report is filed on a daily basis and collects data on repo transactions cleared through a covered clearing agency acting as a central counterparty (CCP) for repo transactions. The report consists of three parts: Schedule 1 collects data on outstanding general collateral trades; Schedule 2 collects data on the securities used to settle netted general collateral obligations; and Schedule 3 collects data on outstanding specific-security trades. FED will act as the collection agent of OFR, with required data to be submitted directly to the Federal Reserve Bank of New York (FRBNY). All respondents must submit their completed report using the eFeds system of FED or any successor technology identified by the FRBNY. FRBNY will also provide technical assistance to respondents on using this or any successor system.
The daily collection will enhance the ability of the Financial Stability Oversight Council to identify and monitor potential risks to U.S. financial stability by closing the data gap related to centrally cleared repo transactions. The collection will also support the calculation of certain reference rates, particularly alternatives to the U.S. dollar London Interbank Offered Rate (LIBOR). LIBOR has been used as a benchmark to set interest rates on trillions of dollars of home mortgages, private student loans, corporate loans, derivatives, and other financial products. LIBOR participation declined after LIBOR-related misconduct, creating the need by industry and regulators for an alternative. As a result of this need, FED formed 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 collection will be used to enhance the production of the SOFR. The data collection will help inform U.S. financial regulators and market participants about potential risks in the financial system, while helping to fill an important need for a LIBOR alternative with minimal regulatory burden.
Following a Notice of Proposed Rulemaking on July 10, 2018, OFR received a handful of substantive comments—all supporting the proposed collection and citing its benefits. The rule requires the submission of information by central counterparties with average daily total open repo commitments of at least USD 50 billion. The Fixed Income Clearing Corporation would be the only market participant required to report if the collection began today, but other firms could meet the eligibility criteria for reporting in the future.
Related Links
Effective Date: April 22, 2019
Keywords: Americas, US, Banking, Securities, Repo, Central Clearing, CCP, SFT-1, Reporting, SOFR, LIBOR, Data Collection, FED, SEC, OFR
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Scott Dietz
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Previous Article
EBA Consults on Amendment to Rule on Benchmarking of Internal ModelsRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards