Investment Operations



The Office of Financial Research has proposed a rule to improve transparency in the U.S. repurchase agreement market. The Office proposed collecting daily transaction level data from certain financial companies on their non-centrally cleared bilateral repurchase agreement trades.

According to James Martin, OFR’s Deputy Director of Operations, the initiative to provide better visibility into this opaque financial market segment is vital to helping ensure financial stability. “When significant stress on U.S. Treasuries spilled into the repo market in March 2020, regulators didn’t have full insight into the segment of the repo market where participants were most active, namely the non-centrally cleared bilateral segment. This was due, in part, to the lack of data reported to officials on these transactions,” said Martin. “The OFR is proposing to fill this data gap, and provide regulators with more insight into Treasury market functioning, by requiring the largest institutions in the repo market to submit data on their non-centrally cleared bilateral transactions to the OFR each day.”

Analysts say repurchase agreements are critical to the U.S. financial system’s securities and money markets. High-quality data are essential to assess and monitor risks in these markets, but historically little data has been available to regulators on bilateral repo activities. The OFR closed part of this data gap in 2019 by beginning to collect data on centrally cleared transactions and has now turned its attention to the non-centrally cleared bilateral repo market. This segment of the repo market – where repo transactions are conducted between two firms without a central counterparty or tri-party custodian – is a blind spot for regulators and is also the largest of the four repo market segments.

The Financial Stability Oversight Council, among others, recommended that the OFR consider ways to obtain better data on the non-centrally cleared bilateral repurchase agreement market, an important source of leverage for hedge funds. After extensive discussions with market participants and consultations with the Council, as well as a pilot data collection initiative, the OFR chose to move forward with a permanent data collection.

Specifically, the OFR proposed that firms submit daily trade and collateral information on all outstanding non-centrally cleared bilateral repurchase agreement transactions. The OFR proposed that covered firms submit 33 data elements each day for all transactions, such as haircut, rate, and optionality. The OFR estimates approximately 40 entities, including primary and nonprimary dealers, and bank- and nonbank-affiliated dealers, will be covered by the rule if adopted.

The notice of proposed rulemaking will be published on and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposed rule in the Federal Register.