The OFR has a partnership with the Federal Reserve and the Securities and Exchange Commission to fill gaps in data about repurchase agreements, or repo. 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. The project promises to improve our understanding of a short-term funding market that is instrumental in providing liquidity — the lubrication that helps to keep the global financial system operating.
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. However, the repo market can also contribute to risks to financial stability. Obtaining more information about these transactions will be filling an important data gap.
The repo market is divided into two parts: (1) the triparty repo market, in which transactions are centrally settled by two large clearing banks (this market includes the general collateral financing [GCF] repo market, in which participants’ transactions are conducted through a central counterparty); and (2) the bilateral repo market, where the parties themselves are responsible for settling the transactions.
Information and data on the triparty and GCF repo markets are published regularly, but information about bilateral repos is scant. In the pilot project, we are focusing on the bilateral repo market, which represents half of the total market. The bilateral market is not only opaque, but also vulnerable to runs and fire sales.
The project marks the first time the OFR went directly to industry to collect financial market information. But participation in the pilot project was voluntary, and participating companies provided input on what data should be gathered. The OFR appreciates the input of the participating firms: Bank of America, Barclays PLC, Deutsche Bank AG, The Goldman Sachs Group Inc., HSBC Holdings PLC, JP Morgan Chase & Co, Morgan Stanley, RBS Americas, and UBS AG.
In an OFR brief, we published aggregated data from the survey to provide greater transparency into the bilateral repo market for participants and policymakers.
Director’s Related blog post - OFR Teams with Fed to Fill Key Gap in Financial Data