OFR guide criticises sec lending reporting standards
11 September 2015 Washington
Image: Shutterstock
Securities lending and bilateral repo reporting data is “spotty and incomplete”, according to an Office of Financial Research (OFR) Reference Guide.
The ‘Reference Guide to US Repo and Securities Lending Markets’, published this week, highlights a lack of “essential” cash collateral reinvestment reporting requirements and a need to improve consistency in data reporting metrics.
The reference guide, authored by Viktoria Baklanova and Rebecca McCaughrin of the OFR, Adam Copeland of the Federal Reserve Bank of New York, states: “The lack of a common data standard for identifying counterparties presents a substantial challenge in monitoring cross-market and cross-border exposures.”
The US-focused guide offers a comprehensive overview of the sec lending and repo markets with a breakdown of the key areas of position options, demographics and the legal and reporting requirements.
Data reporting requirements have had to develop significantly since the 2008 crash and private data providers such as SunGard and Markit now offer granular data on securities lending activity collected directly from industry participants.
However, as the guide points out: “these data collections are voluntary and incomplete. They also lack data on counterparties or collateral management that are essential for market monitoring purposes.”
“Adrian et al. [the Federal Reserve Bank and of New York staff report 2013] argued that at least six data elements are required for adequate monitoring and policy analysis of securities financing markets: principal amount, interest rate (or lending rate for securities lending transactions), collateral type, haircut, tenor, and counterparty.”
“Available data sources for the bilateral repo and securities lending segments do not include most of these data elements. For example, counterparty information is not provided in any available sources covering securities lending, making it challenging to track market interconnectedness through this activity.”
The guide ultimately concludes that for securities lending and repo markets to achieve a responsible level of transparency and regulatory oversight, “a permanent data collection is needed to fully address the discussed data gaps. Success in these and other future efforts will require adoption of international data standards, extensive collaboration, and improvements in data sharing”.
The ‘Reference Guide to US Repo and Securities Lending Markets’, published this week, highlights a lack of “essential” cash collateral reinvestment reporting requirements and a need to improve consistency in data reporting metrics.
The reference guide, authored by Viktoria Baklanova and Rebecca McCaughrin of the OFR, Adam Copeland of the Federal Reserve Bank of New York, states: “The lack of a common data standard for identifying counterparties presents a substantial challenge in monitoring cross-market and cross-border exposures.”
The US-focused guide offers a comprehensive overview of the sec lending and repo markets with a breakdown of the key areas of position options, demographics and the legal and reporting requirements.
Data reporting requirements have had to develop significantly since the 2008 crash and private data providers such as SunGard and Markit now offer granular data on securities lending activity collected directly from industry participants.
However, as the guide points out: “these data collections are voluntary and incomplete. They also lack data on counterparties or collateral management that are essential for market monitoring purposes.”
“Adrian et al. [the Federal Reserve Bank and of New York staff report 2013] argued that at least six data elements are required for adequate monitoring and policy analysis of securities financing markets: principal amount, interest rate (or lending rate for securities lending transactions), collateral type, haircut, tenor, and counterparty.”
“Available data sources for the bilateral repo and securities lending segments do not include most of these data elements. For example, counterparty information is not provided in any available sources covering securities lending, making it challenging to track market interconnectedness through this activity.”
The guide ultimately concludes that for securities lending and repo markets to achieve a responsible level of transparency and regulatory oversight, “a permanent data collection is needed to fully address the discussed data gaps. Success in these and other future efforts will require adoption of international data standards, extensive collaboration, and improvements in data sharing”.
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