OFR requests comment on proposed data collection rule
17 July 2018 Washington DC
Image: Shutterstock
The US Treasury Department’s Office of Financial Research (OFR) has requested comment on a proposed rule to establish a data collection covering centrally cleared funding transactions in the US repo market.
According to the OFR, the proposed data collection would enhance the ability of the Financial Stability Oversight Council to identify and monitor potential risks to US financial stability, by closing the data gap on centrally cleared repo transactions.
The proposed rule would require the submission of information by central counterparties with average daily total open repo commitments of at least $50 billion.
However, the Fixed Income Clearing Corporation would be the only market participant required to report if the rule went into effect, the OFR stated other firms could meet the eligibility criteria for reporting in the future.
It also said the proposed collection would support the calculation of certain reference rates, particularly alternatives to the US 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.
The OFR said: “In the wake of LIBOR-related misconduct, LIBOR participation has declined, leaving a need by industry and regulators for an alternative reference rate.”
In response, the Federal Reserve convened the Alternative Reference Rates Committee, which selected the Secured Overnight Financing Rate (SOFR) as the preferred LIBOR alternative.
Cleared repo data from the proposed collection will be used to enhance the production of the SOFR.
The Federal Reserve Board is expected to act as the OFR’s data collection agent, with required data to be submitted directly to the Federal Reserve Bank of New York.
Ken Phelan, acting OFR director, commented: “The proposed rule is important to inform US financial regulators and market participants and will strengthen financial markets with minimal regulatory burden. A well-functioning repo market is critical to US financial markets and financial stability.”
According to the OFR, the proposed data collection would enhance the ability of the Financial Stability Oversight Council to identify and monitor potential risks to US financial stability, by closing the data gap on centrally cleared repo transactions.
The proposed rule would require the submission of information by central counterparties with average daily total open repo commitments of at least $50 billion.
However, the Fixed Income Clearing Corporation would be the only market participant required to report if the rule went into effect, the OFR stated other firms could meet the eligibility criteria for reporting in the future.
It also said the proposed collection would support the calculation of certain reference rates, particularly alternatives to the US 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.
The OFR said: “In the wake of LIBOR-related misconduct, LIBOR participation has declined, leaving a need by industry and regulators for an alternative reference rate.”
In response, the Federal Reserve convened the Alternative Reference Rates Committee, which selected the Secured Overnight Financing Rate (SOFR) as the preferred LIBOR alternative.
Cleared repo data from the proposed collection will be used to enhance the production of the SOFR.
The Federal Reserve Board is expected to act as the OFR’s data collection agent, with required data to be submitted directly to the Federal Reserve Bank of New York.
Ken Phelan, acting OFR director, commented: “The proposed rule is important to inform US financial regulators and market participants and will strengthen financial markets with minimal regulatory burden. A well-functioning repo market is critical to US financial markets and financial stability.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
