OFR Continues Efforts to Fill Key Gap in Financial Data

In a presentation last week to the Financial Stability Oversight Council, the OFR discussed the next phase of a critical initiative: providing more transparency into the repurchase agreement market.

Filling key gaps in financial data, such as through this project, is an essential element of OFR’s mission. The Office was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act partly to promote financial stability by collecting data on behalf of the Council and providing such data to the Council and member agencies.

Repurchase agreements are critical in our financial system’s money and securities markets. High-quality data are essential to assess and monitor risks in these markets, but historically little data has been available on bilateral repo activities. The OFR closed part of this data gap in 2019 by collecting data on centrally cleared transactions and has now turned its attention to the non-centrally cleared bilateral segment.

This segment of the repo market - where repo transactions are conducted between two firms without the involvement of a central counterparty or tri-party custodian – is a blind spot for regulators. Earlier this year, the OFR went directly to the industry to learn more about this opaque market. We engaged in a series of discussions about how non-centrally cleared bilateral trades are conducted and documented. As such, we are gathering data on non-centrally cleared bilateral repo transactions from nine institutions who volunteered to submit their data over three business days in June. This work represents the first step toward permanent data collection by the OFR in this crucial market segment.

At the OFR, our job is to look across the financial system and shine a light into its dark corners. We look forward to the insights this voluntary data collection will yield in promoting the stability of short-term financing markets and our broader financial system.

James Martin is the Acting Director of the Office of Financial Research