US OFR bilateral uncleared repo reporting – playing catch-up or saving the greatest till last?

The market has been taken by surprise by the 2 December 2024 go live date for the new OFR Bilateral Uncleared Repo Reporting regime. Earlier this month, the OFR (Office of Financial Research) of the US Treasury adopted the non-centrally cleared bilateral repo (NCCBR) final rule.

Largest segment of the US repo market comes under scrutiny

In the headline of this blog, I say ‘the greatest’ because at $US2 trillion outstanding commitments per day, this is the largest of the four segments of the US repo market and by extension, the US SFT market overall as well. It is also the second biggest single SFT market in the world (after the EU bilateral uncleared repo market). Despite its size, this market remains rather opaque, something that the OFR is finally looking to address.  

While the activities in the US cleared repo and triparty repo markets are already captured by US regulators, the securities lending market (where reporting commences in 2026) and non-centrally cleared bilateral repo (NCCBR) markets remain under-scrutinised. This became a particular concern following the spike in repo rates that occurred in September 2019 and also in relation to the sharp drop in US Treasury prices and further spike in repo rates in March 2020. US regulators continue to harbour major concerns about collateral risks given the prevalence of lower quality non-Fedwire eligible collateral. They are also concerned about the amount of cash borrowing the uncleared bilateral markets offer to highly leveraged entities such as hedge funds.        

Background to the final rule

The OFR is wasting no time in closing out this gap, albeit more than nine years after the seminal Financial Stability Board (FSB) paper ‘Standards and Processes for Global Securities Financing Data Collection and Aggregation‘, and four and a half years after SFTR go-live in Europe.

We had a pilot reporting exercise from the OFR in June 2022, followed by the publication of proposed rulemaking for the collection of NCCBR data in January 2023 and a 60 day consultation ending in March 2023 – then radio-silence!  Then on 6 May 2024, the OFR published the final rule along with reporting instructions, technical guidance and a fact sheet on reporting

Shock announcement 

Taking the market by surprise, they have sprung a 2 December 2024 reporting go-live date upon us (150 days after the effective date of 5 July 2024) for ‘Category 1’ covered reporters. These include securities brokers, securities dealers, government securities brokers and government securities dealers with outstanding commitments to borrow cash and extend guarantees in NCCBR transactions with counterparties every business day during the prior quarter of $US10 billion. This captures approximately 40 firms.

Category 2 reporters are required to comply 120 days later from 1 April 2025. Category 2 reporters comprise of any financial companies that are not securities or government securities brokers or dealers with over $US1 billion in assets or under management whose average daily commitments in NCCBR transactions are over $US10 billion in each of the business days in the prior calendar quarter. Category 2 will routinely capture relatively few firms but nevertheless, those potentially coming into scope will be expected to re-test themselves for eligibility each quarter.

Reporting requirements 

The very aggressive deadline aside, surveying the reporting itself, it looks eminently sensible.  It is essentially daily repo position reporting of all new transactions, existing transactions that remain open and any transactions opened and closed on the same business day.       

What’s in scope?

The scope will include bilateral uncleared repos under (but not limited to) Master Repurchase Agreements (MRA), Global Master Repurchase Agreements (GMRA) or transactions subject to the provisions of 11 U.S.C. 559. Following the consultation regarding the proposed rule, sell/buy-back transactions have also been brought into scope. However, transactions under Securities Lending Agreements (SLA), Master Securities Lending Agreements (MSLA) or Global Master Securities lending Agreements (GMSLA) not considered as repurchase agreements, are expressly out of scope, acknowledging that these will be captured imminently under the FINRA SLATE regime under the SEC 10c-1a regulation. Repos associated with the execution of commercial mortgage loans or the initial securitisation of a residential mortgage loan are also out of scope.    

Reports comprise 32 fields

Reporting comprises of 32 data fields by 11am on Trade Date +1 (T+1) Eastern time, following a trading day that runs from 6pm on T-1 to 6pm on T. Reporting shuns the needless complexity of ISO 20022 XML for more human-readable TXT or CSV, to be submitted to the OFR’s Data Collection Utility (DCU). The only lifecycle / action type required is the need to requirement to resubmit a day’s complete submission should OFR enquiries result in the identification of an error.

Maybe all SFT reporting should be like this! The ability for regulators to survey the latest activities and current SFT position of firms on a daily basis without the need for a complex set of reportable actions, data tables and in excess of 100 fields seems admirable. The only notable limitation may be the lack of availability of collateral reuse data.      

If you are concerned about your reporting obligations under the OFR’s Uncleared Bilateral Repo Reporting requirements, FINRA ‘SLATE’ SEC 10c-1 for securities lending, or other global money market reporting obligations generally, please get in touch.