Update on OFR’s Efforts to Fill Key Gap in Financial Data
Published: May 12, 2023
A new brief the OFR published today documents basic facts about volumes, rates, counterparty types, collateral, and haircuts in the relatively opaque noncentrally cleared bilateral repo market
The noncentrally cleared bilateral repo market is the last remaining market segment where transaction-level data is not reported to regulators. It is the largest of the four repo market segments, with an estimated $2 trillion of daily transactions, and is an important source of hedge fund leverage.
In January, the OFR published its proposal to collect data on noncentrally cleared bilateral repo commitments. Comments were due by March 10, and we are currently evaluating the feedback to help us shape the final rule, targeted for late this year.
To obtain more immediate visibility into the noncentrally cleared bilateral repo market, in 2022, the OFR conducted a series of meetings with various industry participants, including government securities dealers and data service providers who provide electronic trading platforms tailored to the unique needs of bilateral repo trades.
The OFR also asked for and received voluntary submissions of three days’ worth of data from several of the largest dealers. By hearing directly from industry participants and analyzing data on the more than 70,000 noncentrally cleared bilateral repurchase transactions shared with us, the OFR has gained a better understanding of the economics and technical details of the noncentrally cleared bilateral repurchase market structure, trading and transaction flow, and existing data standards. The pilot data also helped us better understand sources of hedge fund leverage and hedge funds’ important role in short-term funding markets more broadly. We have published some of our analysis using this data, and we plan to shed more light on this market in months to come.
A core part of the OFR’s mission is to fill data gaps that impede our understanding of financial system vulnerabilities. We look forward to the insights this voluntarily provided and permanent data collection will yield in promoting the stability of short-term financing markets and our broader financial system.
James Martin is the Deputy Director of Operations performing the duties of the Director