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Treasury Requires Reporting of Repo Activity by CCPs

The U.S. Treasury Department Office of Financial Research ("OFR") adopted final rules establishing a data collection requiring the reporting of certain information about centrally cleared transactions in the U.S. repurchase agreement ("repo") market to the OFR.

As previously covered, the final rule will require certain U.S. central counterparties ("CCPs") to report daily on repo transactions. The primary purposes of the final rule are to (i) enable the Financial Stability Oversight Council and the OFR to identify and monitor risks to financial stability and (ii) improve the calculations of certain reference rates, such as the Secured Overnight Funding Rate (SOFR).

The OFR stated that under the final rules:

  • only CCPs that are clearing agencies and that perform the central clearing function for repo transactions "at or above the activities-based volume threshold" are obligated to report;
  • the Legal Entity Identifier ("LEI") reported must meet the standards implemented by the Global LEI Foundation;
  • a "phase-in period for data elements requiring an LEI" is adopted;
  • if a covered reporter is able to effect a rulemaking obligating each direct clearing member, counterparty and broker linked with a repo transaction to get an LEI and give it to that covered reporter, the covered reporter is required to start reporting those LEIs within 420 days after the final rules' effective date;
  • covered reporters are given discretion with regard to adding the LEIs of reporting entities and counterparties after the transactions take place but before the submission of data to the OFR;
  • LEIs of the entities required will "facilitate evaluation of repo transactions and whether a repo transaction was conducted on an arm's-length basis or between affiliates"; and
  • "Substitution Collateral Identifier" refers "to the actual value of the identifier, which refers to a specific financial instrument."

The rule will become effective 60 days following its publication in the Federal Register.

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