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OFR Offers Analysis from Repo Pilot

The Office of Financial Research recently released an analysis of data collected on the bilateral repo markets through a voluntary pilot program conducted in conjunction with the Federal Reserve and with input from the SEC. The report estimates the overall size of the markets at $1.8 trillion in repos and $3 trillion in reverse repos. The nine bank holding companies participating in the pilot program represented approximately half of the overall amounts. The OFR found that Treasurys were used for collateral in 61.4 percent of repos and 81 percent of reverse repos, with equities the next most common collateral type at 21.1 percent and 15.3 percent, respectively.

For transactions collateralized by Treasurys, 20.2 percent were "open" or immediately callable, while 32 percent were overnight maturities. Overnight interest rates for repos or securities borrowers averaged 0.05 percent for Treasurys and -0.85 percent for equities. For reverse repos or securities lenders, rates averaged -0.01 percent for Treasurys and -0.55 percent for equities. While certain average rates were negative, meaning that the security borrower paid to receive scarce securities, the median rates were still positive.

The OFR identified several challenges with the pilot data collection. The pilot was limited due to its voluntary nature and the inclusion of only some participants makes the tracking of migrating repo activity difficult. The OFR also noted difficulty due to lack of data standards, making it challenging to identify counterparties. Similarly, the report notes that the reporting systems of pilot participants were developed to meet internal needs and thus are not yet optimized to provide consistent and complete data to regulators.

As a next step, regulators are working to make granular data collection permanent and are coordinating on an international level to develop consistent definitions and reporting requirements. The OFR is currently conducting a second pilot collection, focusing on non-dealer participants.