A new report from the Office of Financial Research offers a brief overview of the repo and securities lending markets and identifies current gaps in available data on the markets. Researchers suggest that the repo and securities lending markets register at nearly $4 trillion on a typical day, though this number is based on extrapolation and estimation.
The report notes that data is currently collected via two approaches. First, data is available from the regulatory filings of participants. Depository institutions and bank holding companies file quarterly reports on the value of repos, reverse repos and valuation of collateral. Other participants, such as mutual funds, insurance companies and mortgage real estate investment trusts, also provide quarterly filings with relevant information. While this information provides “deep insight into financing activities of an individual firm” it does not provide information the type of granular data that the OFR feels is necessary to assess the markets. Additionally, these filings do not provide a market-wide view and are difficult to aggregate due to the lack of common reporting standards.
The second method is to collect segment-specific data from parties such as clearing banks involved in triparty repos. However, the report notes that this method misses parts of the market, such as bilateral trades that do not involve the clearing banks, and further that many granular data elements may not be publicly available.
The report notes that data on securities lending is available from private vendors, but that the data is voluntary and therefore incomplete. Also absent from the data is information about counterparties and collateral management. The OFR points out that the SEC has yet to propose rules required by Dodd-Frank that are “designed to increase the transparency of information available to brokers, dealers, and investors, with respect to the loan or borrowing of securities.”
The OFR suggests that data on these markets is vital so that policymakers can “conduct in-depth analysis of the pros and cons of policy options and to monitor current market development.” The OFR recently launched a voluntary pilot program with the Federal Reserve to collect the granular-type data that it feels is currently lacking in the repo and securities lending markets.
The OFR also indicated that it intends to release a “reference guide on U.S. repo and securities lending markets. The guide will examine more closely how dealers and their clients use these markets, building on the ongoing research on the sources and uses of short-term funding.”