The OFR adopted a rule in February 2019 to establish a data collection covering centrally cleared funding transactions in the U.S. repurchase agreement (repo) market.
The data collection, expected to begin in October 2019, 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 on centrally cleared repo transactions.
The collection will also support the calculation of certain reference rates, particularly the Secured Overnight Financing Rate, or SOFR. The Alternative Reference Rates Committee, made up of banks active in the derivatives market, selected the SOFR as the preferred alternative 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 retail mortgages, private student loans, corporate loans, derivatives, and other financial products. Due to the decline in transactions underlying LIBOR, its long-term sustainability is in doubt, creating a need by industry and regulators for an alternative.
In drafting the rule, the OFR collaborated with the Federal Reserve, Securities and Exchange Commission, and others. The OFR’s Reporting Instructions for Covered Reporters contains important information on how to file reports.
A repo is essentially a collateralized loan, when one party sells a security to another party with an agreement to repurchase it later at an agreed price. Repos are an important source of short-term funding for the financial industry. The U.S. repo market provides more than $3 trillion in funding every day.
The OFR collection will provide information on the two centrally cleared portions of the repo market. The collection marks the first time the OFR is going directly to industry to collect financial market information on an ongoing basis.