OFR adopts final rule for US repo market
13 February 2019 Washington DC
Image: Shutterstock
The US Office of Financial Research (OFR) has adopted a final rule to establish a data collection covering centrally cleared funding transactions in the US repurchase agreement (repo) market.
According to the OFR, the daily collection will enhance the ability of the Financial Stability Oversight Council to identify and monitor potential risks to US financial stability by closing the data gap related to centrally cleared repo transactions.
The collection will also 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 home mortgages, private student loans, corporate loans, derivatives, and other financial products.
The OFR said: “LIBOR participation declined after LIBOR-related misconduct, creating the need by industry and regulators for an alternative.”
As a result of this need, the Federal Reserve formed the industry-led Alternative Reference Rates Committee, which selected the Secured Overnight Financing Rate (SOFR) as the preferred LIBOR alternative.
Cleared repo data from the collection will be used to enhance the production of the SOFR.
The OFR said the data collection will help inform US financial regulators and market participants about potential risks in the financial system while helping to fill an important need for a LIBOR alternative with minimal regulatory burden.
According to the OFR, the daily collection will enhance the ability of the Financial Stability Oversight Council to identify and monitor potential risks to US financial stability by closing the data gap related to centrally cleared repo transactions.
The collection will also 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 home mortgages, private student loans, corporate loans, derivatives, and other financial products.
The OFR said: “LIBOR participation declined after LIBOR-related misconduct, creating the need by industry and regulators for an alternative.”
As a result of this need, the Federal Reserve formed the industry-led Alternative Reference Rates Committee, which selected the Secured Overnight Financing Rate (SOFR) as the preferred LIBOR alternative.
Cleared repo data from the collection will be used to enhance the production of the SOFR.
The OFR said the data collection will help inform US financial regulators and market participants about potential risks in the financial system while helping to fill an important need for a LIBOR alternative with minimal regulatory burden.
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