[Federal Register Volume 89, Number 88 (Monday, May 6, 2024)]
[Rules and Regulations]
[Pages 37091-37109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08999]


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DEPARTMENT OF THE TREASURY

Office of Financial Research

12 CFR Part 1610


Ongoing Data Collection of Non-Centrally Cleared Bilateral 
Transactions in the U.S. Repurchase Agreement Market

AGENCY: Office of Financial Research, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Financial Research (the ``Office'') within the 
U.S. Department of the Treasury (``Treasury'') is adopting a final rule 
(the ``Final Rule'') establishing a data collection for certain non-
centrally cleared bilateral transactions in the U.S. repurchase 
agreement (``repo'') market. This collection requires daily reporting 
to the Office by certain brokers, dealers, and other financial 
companies with large exposures to non-centrally cleared bilateral repo 
(``NCCBR''). The collected data will be used to support the work of the 
Financial Stability Oversight Council (the ``Council''), its member 
agencies, and the Office to identify and monitor risks to financial 
stability.

DATES: 
    Effective date: July 5, 2024.
    Compliance Dates: See the amendment to 12 CFR 1610.11(e).

FOR FURTHER INFORMATION CONTACT: Michael Passante, Chief Counsel, 
Office of Financial Research, (202) 921-4003, 
[email protected], Sriram Rajan, Associate Director of 
Financial Markets, Office of Financial Research, (202) 594-9658, 
[email protected], or Laura Miller Craig, Senior Advisor, 
Office of Financial Research, (202) 927-8379, 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

    The Office is adopting the Final Rule to establish an ongoing data 
collection for certain non-centrally cleared bilateral transactions in 
the U.S. repo market. The Final Rule will require reporting by certain 
covered reporters for repo transactions that are not centrally cleared 
and have no tri-party custodian. The purpose is to enhance the ability 
of the Council, Council member agencies, and the Office to identify and 
monitor risks to financial stability. Under the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (the ``Dodd-Frank Act''), the Office 
is authorized to issue rules and regulations to collect and standardize 
data that supports the Council in fulfilling its duties and purposes, 
such as identifying risks to U.S. financial stability. In a 2022 
statement on nonbank financial intermediation, the Council supported a 
recommendation that the Office consider ways to obtain better data on 
the NCCBR market segment, and in July 2022 and February 2024, the 
Office consulted with the Council on efforts to collect NCCBR data.\1\
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    \1\ Financial Stability Oversight Council Statement on Nonbank 
Financial Intermediation. February 4, 2022. https://home.treasury.gov/news/press-releases/jy0587; Meeting minutes. FSOC, 
July 28, 2022, page 7; Readout: Financial Stability Oversight 
Council Meeting on February 23, 2024. https://home.treasury.gov/news/press-releases/jy2122.
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    This collection requires reporting on NCCBR transactions, which 
currently comprise the majority of repo activity by several key 
categories of financial companies, such as hedge funds. This collection 
will provide visibility and transparency into a crucial segment of the 
U.S. repo market, the one remaining market segment for which 
transaction-level data is not available to regulators.\2\
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    \2\ Hempel, Samuel, R. Jay Kahn, Vy Nguyen, and Sharon Y. Ross. 
``Non-centrally Cleared Bilateral Repo.'' OFR Blog. Office of 
Financial Research. August 24, 2022. https://www.financialresearch.gov/the-ofr-blog/2022/08/24/non-centrally-cleared-bilateral-repo/.
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    Collection of information on the NCCBR segment of the repo market 
is critical to understanding potential financial stability risks. The 
data to be collected under the Final Rule will enable the Office to 
monitor risks in this market. Because the Council's duties relate to 
monitoring and responding to potential financial stability risks, the 
collection will support the Office's statutory mandate to support the 
work of the Council.
    The Office issued its Notice of Proposed Rule Making (``NPRM'' or 
``proposed rules'') for a 60-day public comment period, ending on March 
10, 2023.\3\ In response, the Office received more than 30 comment 
letters conveying a range of perspectives.\4\ Although the majority of 
commenters supported the proposed collection, noting the potential 
benefits to the monitoring of risks to financial stability, several 
identified issues that the Office has addressed in the discussion below 
and, in some cases, through regulatory text changes reflected in the 
Final Rule. In making these changes, the Office intends to minimize the 
burden of the Final Rule while ensuring that the purposes of the 
collection as expressed in the NPRM and below are met.
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    \3\ Department of the Treasury. Collection of Non-centrally 
Cleared Bilateral Transactions in the U.S. Repurchase Agreement 
Market. Proposed Rule, 88 FR 1154 (January 9, 2023). https://www.federalregister.gov/d/2022-28615, hereafter cited as 88 FR 1154.
    \4\ Comment letters to the proposed rules may be found at 
https://www.regulations.gov/document/TREAS-DO-2023-0001-0001/comment.
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    Since the publication of the NPRM, two new regulations were adopted 
that are relevant to the Office's collection. The Office believes that 
one of these will materially affect this collection. On December 13, 
2023, the U.S. Securities and Exchange Commission (SEC) adopted rules 
under the Securities Exchange Act of 1934 (``Exchange Act'') to amend 
the standards applicable to covered clearing agencies for U.S. Treasury 
securities. The final rules require that every direct participant of 
the covered clearing agency submit for clearance and settlement all 
repo activity collateralized by U.S. Treasury securities to which it is 
a counterparty (the ``SEC's central clearing rules'').\5\ On February 
6, 2024, the SEC also adopted new rules to further define the phrase 
``as part of a regular business'' as used in the statutory definitions 
of ``dealer'' and ``government securities dealer.'' \6\ The Office has 
considered the likely

[[Page 37092]]

impact of these rules on its NCCBR collection, as described below.
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    \5\ Securities and Exchange Commission. Standards for Covered 
Clearing Agencies for U.S. Treasury Securities and Application of 
the Broker-Dealer Customer Protection Rule with Respect to U.S. 
Treasury Securities. Final Rule, 89 FR 2714 (January 16, 2024). 
https://www.federalregister.gov/d/2023-27860.
    \6\ Securities and Exchange Commission. Further Definition of 
``As a Part of a Regular Business'' in the Definition of Dealer and 
Government Securities Dealer in Connection with Certain Liquidity 
Providers. Final Rule, 89 FR 14938 (Feb. 29, 2024). (``Further 
Definition of `As a Part of a Regular Business' '') https://www.federalregister.gov/d/2024-02837.
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II. Background and Description of the Final Rule

    The following discussion summarizes the proposed rules, the 
comments received, and the Office's responses to those comments, 
including modifications reflected in the Final Rule.

II(a) Structure of the Repo Market and Purpose of the Final Rule

    As noted in the NPRM, the collection of data pursuant to this Final 
Rule will support the Council, its member agencies, and the Office in 
carrying out their responsibilities through the use of the data to 
identify and monitor potential financial stability risks in the U.S. 
repo market.
    The repo market can be divided into four segments, which span the 
different combinations of centrally cleared and non-centrally cleared, 
tri-party, and bilateral repo.\7\ For three of these segments, data are 
currently collected by regulators. The collection under the Final Rule 
has been designed to fill a critical gap in regulators' information on 
the overall repo market by collecting data on the NCCBR segment, the 
last segment for which regulators do not have a transaction-level data 
source.
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    \7\ 88 FR 1154, 1156, citing Kahn, R. Jay, and Luke M. Olson. 
``Who Participates in Cleared Repo?'' Brief no. 21-01, Washington, 
DC: Office of Financial Research, 2021. For more background, see 
Baklanova, Viktoria, Adam Copeland, and Rebecca McCaughrin. 
``Reference Guide to U.S. Repo and Securities Lending Markets.'' 
Working Paper no. 15-17, Washington, DC: Office of Financial 
Research, 2015.
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    As noted in the NPRM, the need for a collection of data on this 
segment of the market to assist policymakers' understanding of the repo 
market has been recognized by the Council since 2016, when it first 
called for the Office to establish a permanent repo data collection.\8\ 
This lack of visibility was felt acutely following two recent episodes 
of stress in repo markets. The first of these recent episodes involved 
a spike in repo market rates in September 2019 and the second a decline 
in Treasury prices, which spilled over to the repo market through 
higher rates, in March 2020. For both of these episodes, substantial 
portions of activity in these crucial funding markets could not be 
observed. In the wake of these episodes, market participants and the 
official sector have pointed to this segment as a critical blind spot 
in a market that plays a key role in financial stability.\9\
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    \8\ Financial Stability Oversight Council. 2016 Annual Report, 
page 14, Washington, DC: FSOC, 2016. https://home.treasury.gov/system/files/261/FSOC-2016-Annual-Report.pdf.
    \9\ Logan, Lorie K. ``Treasury Market Liquidity and Early 
Lessons from the Pandemic Shock.'' Remarks, Brookings-Chicago Booth 
Task Force on Financial Stability Meeting, 2020; International 
Monetary Fund. 2020. ``United States: Financial Sector Assessment 
Program Technical Note: Risk Oversight and Systemic Liquidity;'' 
Liang, Nellie, and Pat Parkinson. ``Enhancing Liquidity of the U.S. 
Treasury Market Under Stress.'' Working Paper no. 72, Washington, 
DC: Brookings Hutchins Center on Fiscal and Monetary Policy, 2020; 
BlackRock. 2020. ``Lessons from COVID-19: Market Structure Underlies 
Interconnectedness of the Financial Market Ecosystem.'' BlackRock 
ViewPoint; Bank Policy Institute. 2020. ``Necessary Dimensions of a 
Holistic Review of the Meltdown of U.S. Bond Markets in March;'' 
Citadel Securities. 2021. ``Enhancing Competition, Transparency, and 
Resiliency in U.S. Financial Markets;'' Feldberg, Greg. ``Fixing 
Financial Data to Assess Systemic Risk.'' Brookings Economic 
Studies, 2020; Brookings Hutchins Center on Fiscal and Monetary 
Policy. 2021. ``Report of the Task Force on Financial Stability.''
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    Both of these episodes illustrate that the NCCBR market segment may 
be subject to the systemic vulnerabilities discussed below and perhaps 
has become even more central to the functioning of U.S. securities and 
short-term funding markets. Though these vulnerabilities are present to 
a greater or lesser extent across the four segments of the repo market, 
certain characteristics of the NCCBR segment may be especially prone to 
such vulnerabilities and exacerbate the risks in other segments.

II(b) NCCBR Market Segment Characteristics That May Increase Financial 
Stability Risks

    In the NPRM, the Office noted the framework set forth in its 
centrally cleared repo rule \10\ for understanding activity in the 
overall repo market and the associated vulnerabilities across five 
functions that repo provides: (1) a low-risk cash investment, (2) 
monetization of assets, (3) transformation of collateral, (4) 
facilitation of hedging, and (5) more generally, a support for 
secondary market liquidity and pricing efficiency.\11\
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    \10\ Department of the Treasury. Ongoing Data Collection of 
Centrally Cleared Transactions in the U.S. Repurchase Agreement 
Market. Final Rule, 84 FR 4975 (Feb. 20, 2019). https://www.federalregister.gov/d/2018-14706.
    \11\ 88 FR 1154, 1157. https://www.federalregister.gov/d/2022-28615.
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    Certain characteristics of the NCCBR market segment may increase 
the potential for risks to financial stability relative to other 
segments. However, data gaps have limited the ability of financial 
regulators to monitor risks and vulnerabilities in this segment. 
Additionally, because abrupt changes in these characteristics can have 
financial stability consequences, addressing data gaps is important.
    The NPRM highlighted collateral risk as a key motivation for the 
collection. The NCCBR market segment generally involves riskier 
collateral than other repo segments, because centrally cleared markets 
are limited to Fedwire-eligible collateral, such as Treasuries and 
agency bonds. Data from the Federal Reserve Bank of New York's Primary 
Dealer Statistics show that 95% of primary dealer repo lending against 
non-Fedwire-eligible collateral (including asset-backed securities, 
corporate debt, and other securities) is conducted through the NCCBR 
market segment. These collateral types are riskier than Treasury and 
agency securities. Supported by riskier collateral, the NCCBR market 
segment may be more exposed to the risks associated with monetizing 
assets.
    The NCCBR market segment also has counterparty complexity that 
warrants attention. Many counterparties in this market are not as 
active in the centrally cleared or tri-party repo markets, which are 
market segments about which more data are available to financial 
regulators. The NCCBR market segment facilitates a large amount of cash 
borrowing by highly leveraged entities such as hedge funds.\12\ As a 
result, financial regulators and market participants do not have 
sufficient information on the overall complexity and extent of hedge 
funds' daily repo borrowing to assess potential risks. For instance, 
financial regulators did not have access to sufficient data to 
understand the risk management practices of Long-Term Capital 
Management (LTCM).\13\ LTCM, a hedge fund that failed in 1998, built up 
large counterparty exposures through NCCBR.\14\ The firm conducted its 
repo and reverse-repo transactions with 75 different counterparties, 
many of which were reportedly unaware of the nature of LTCM's total 
exposure. These large exposures created through repo were a key source 
of systemic stress from LTCM's failure, as liquidations of the

[[Page 37093]]

underlying collateral in bankruptcy could have resulted in 
significantly depressed prices and broader market disruptions.\15\ 
While transparency into other segments of the repo market has increased 
since 1998, the NCCBR market segment has remained opaque.
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    \12\ Hempel, Samuel, R. Jay Kahn, Vy Nguyen, and Sharon Y. Ross. 
2022. ``Non-centrally Cleared Bilateral Repo.'' August 24, 2022. The 
OFR Blog. Office of Financial Research. https://www.financialresearch.gov/the-ofr-blog/2022/08/24/non-centrally-cleared-bilateral-repo/.
    \13\ ``Long-Term Capital Management: Regulators Need to Focus 
Greater Attention on Systemic Risk: Report to Congressional 
Requesters,'' United States. General Accounting Office, 1999.
    \14\ Parkinson, Patrick M. ``Report on Hedge Funds, Leverage, 
and the Lessons of Long-Term Capital Management. Testimony, U.S. 
House, May 6, 1999, Congress, Washington, DC: Federal Reserve Board, 
1999. https://www.federalreserve.gov/boarddocs/testimony/1999/19990506.htm; Dixon, Lloyd, Noreen Clancy, and Krishna B. Kumar. 
2012. Hedge Funds and Systemic Risk. Santa Monica, California: RAND 
Corporation. http://www.jstor.org/stable/10.7249/j.ctt1q60xr.11.
    \15\ Parkinson, Patrick M. ``Report on Hedge Funds, Leverage, 
and the Lessons of Long-Term Capital Management.'' Testimony, U.S. 
House, May 6, 1999, Congress, Washington, DC: Federal Reserve Board, 
1999.
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    NCCBR market participants engage in varying risk management 
conventions, but insufficient information regarding these conventions 
is available to enable an assessment of their efficacy. These 
conventions include, but are not limited to, margining and settlement 
practices. For instance, the variation in margining practices across 
competing intermediaries may create competitive pressures that drive 
margins to lower levels than what prudent risk management would 
indicate.\16\ There may also exist widely subscribed margining 
practices which could exacerbate financial stability vulnerabilities in 
times of stress. For instance, the cross-margining of repo, 
derivatives, and futures exposures could result in lower precautionary 
risk buffers, even in the presence of leverage, than if cross-margining 
practices were not in place. In times of stress, inadequate margins may 
be insufficient to buffer payment failures between firms and can result 
in consequential financial contagion. Additionally, risks exist in 
relation to operational aspects of the transaction lifecycle. For 
instance, the Treasury Market Practices Group found that settlement 
practices vary widely and expressed concern that ``bespoke bilateral 
processes may reflect differences in the level of understanding among 
market participants of the inherent risks of Securities Financing 
Transaction (SFT) clearing and settlement.'' \17\ Collectively, NCCBR 
risk management concerns interrelationships between firms within this 
and other markets and spans risks that are not uniquely contained in 
the NCCBR segment.
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    \16\ See also Group of Thirty Working Group on Treasury Market 
Liquidity. U.S. Treasury Markets: Steps Toward Increased Resilience. 
Washington, DC: Group of Thirty, G30, 2021, which notes that 
competitive pressures in the repo market can often ``drive haircuts 
down (sometimes to zero).''
    \17\ Treasury Market Practices Group. ``TMPG Releases Updates 
for Working Groups on Clearing and Settlement Practices for Treasury 
SFTs, Treasury Market Data and Transparency.'' Press Release, 
November 5, 2021: TMPG. https://www.newyorkfed.org/medialibrary/Microsites/tmpg/files/PressRelease_110521.pdf.
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    Activity across the different segments of the repo market is 
linked. For example, the NCCBR market segment can serve as a close 
substitute for centrally cleared bilateral repo. This is particularly 
the case in the sponsored segment of the market for customers that are 
not direct clearing members of the Fixed Income Clearing Corporation 
(FICC), a subsidiary of the Depository Trust & Clearing Corporation, 
such as hedge funds and money market funds. These customers can 
participate in transactions with clearing members and have such 
transactions submitted to FICC for central clearing. As a result, 
migration to and from sponsored repo is also an area of interest for 
regulators concerned with a proper assessment of dealer balance sheets. 
Activity may move between sponsored repo and NCCBR in times of stress 
or in response to incentives created by financial reporting dates. 
Dealers' decisions to transact in NCCBR or in sponsored repo may also 
be affected by factors that affect the degree to which various 
constraints are binding for the dealers, including regulatory ratios 
and counterparty credit limits. Examples of these factors include 
changes in the supply of cash to the repo market from money market 
funds and the netting benefits provided by sponsored repo. To 
understand these shifts between NCCBR and sponsored repo, data on 
outstanding commitments in the NCCBR market segment are required.
    The development of guaranteed repo is another factor that may 
affect flows between NCCBR and sponsored repo. A guaranteed repo is a 
repo in which the performance of one or both counterparties are 
guaranteed by a third-party guarantor. This is typically, but not 
exclusively, used to account for potential variation in value of the 
collateral provided by the cash borrower. Because guaranteed repo 
replicates the profile of offsetting legs of the same repo transaction 
with different counterparties yet has different balance sheet 
implications, guaranteed repo may be an alternative to sponsored repo. 
Since guaranteed repos would represent a similar exposure to offsetting 
repo transactions, it is essential to include these activities in this 
collection to gain a full understanding of the NCCBR segment of the 
repo market.
    In addition to the specific data gaps noted above, because the 
NCCBR market segment has no central counterparty or tri-party custodian 
and due to the lack of transparency, lack of standardized risk 
management practices, the presence of riskier collateral underlying 
some trades, and counterparties with large exposures in the market, 
these data will provide insights into potential financial system 
vulnerabilities.\18\ Many of the counterparties involved in the NCCBR 
segment, such as non-banks and non-primary dealers, are difficult to 
monitor with existing regulatory collections. Transaction-level data 
will provide the official sector with the granularity necessary to 
understand the exposures of market participants on a high-frequency 
basis. This is essential in a market where monthly or quarterly 
reporting may not provide timely indications of future stress or 
provide detailed data on recent periods of stress. Additionally, data 
on collateral will enable regulators to monitor exposures to particular 
classes of securities, margining practices that protect participants 
from fluctuations in collateral values, and the potential transmission 
of stress from the repo markets to securities markets or other markets. 
Timestamps and details of trading venues will allow regulators to 
monitor activity in a market that is often segmented and in which 
intraday liquidity concerns can play a key role in the creation or 
propagation of stress.
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    \18\ Schulhofer-Wohl, Sam; McCormick, Matthew. 2022. ``Expanded 
central clearing would increase Treasury market resilience.'' Dallas 
Fed Economics, December 23, 2022. https://www.dallasfed.org/research/economics/2022/1223.
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    Thus, the collection of transaction-level data on the NCCBR segment 
of the repo market marks a significant step in carrying out the 
Council's recommendation to expand and make permanent the collection of 
data on the U.S. repo market.\19\ It will assist the Council's 
effective identification and monitoring of emerging threats to the 
stability of the U.S. financial system by closing the remaining gap in 
coverage of the U.S. repo market, following the Office's previous 
rulemaking on the centrally cleared repo market. By collecting data 
from certain brokers, dealers, and other financial companies with more 
than $10 billion in extended guarantees and outstanding NCCBR cash 
borrowing, the Office initially expects to observe more than 90% of 
NCCBR transactions by volume, with approximately 40 covered reporters 
in Category 1 (as discussed below) expected at the time of publication 
of the Final Rule.
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    \19\ Financial Stability Oversight Council. 2016 Annual Report, 
page 14, Washington, DC: FSOC, 2016. https://home.treasury.gov/system/files/261/FSOC-2016-Annual-Report.pdf.
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II(c) Effects of Recent Regulations on the Office's Collection

    On December 13, 2023, the SEC adopted a final rule on central 
clearing in the U.S. Treasury market, and on February 12, 2024, the SEC 
adopted a

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final rule expanding dealer registration. This section discusses the 
effects of these rules on the Office's collection under the Final Rule.
II(c)(1) SEC's Central Clearing Rules
    The SEC's central clearing rules, adopted December 13, 2023, are 
designed to facilitate additional clearing of transactions involving 
U.S. Treasury securities. The rules require covered clearing agencies 
in the U.S. Treasury market to require that any direct participant of 
such covered clearing agency submit for clearance and settlement all 
the eligible secondary-market transactions to which the direct 
participant is a counterparty.\20\ The compliance date for the SEC's 
requirements for the central clearing of repo transactions is June 30, 
2026. After that date, the Office anticipates that a large portion of 
Treasury repo transactions will migrate from the NCCBR segment to the 
centrally cleared segments.
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    \20\ The definition of the term ``eligible secondary market 
transaction'' lists certain transactions that may be excluded from 
central clearing. Two notable exclusions are inter-affiliate trades 
and trades in which the direct member is a facilitator or agent 
rather than a direct counterparty. 89 FR 2829, https://www.federalregister.gov/d/2023-27860.
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    The Office has considered the effect of the SEC's central clearing 
rules on the riskiness of transactions that will remain in the NCCBR 
segment, the size of the NCCBR segment, the Office's coverage of the 
NCCBR segment, and the Office's coverage of repo transactions overall.
    The Office expects transparency and financial stability of the repo 
market to improve following the implementation of the SEC's central 
clearing rules. However, the Office's collection will continue to be 
essential for monitoring a substantial portion of the riskiest trades 
in the repo market and will provide visibility into a segment that may 
grow and change in response to future developments.
    Impact on the riskiness of NCCBR transactions: One reason that the 
collection of data from the NCCBR segment will remain important is that 
this segment will retain substantially all of the risks described 
above. While Treasury repo trades by financial companies that are 
members of covered clearing agencies will largely be centrally cleared 
as a result of the SEC's central clearing rules, the remaining trades 
will likely be riskier, such as those backed with lower-quality 
collateral or those with smaller, riskier financial companies that 
currently cannot be members of clearing agencies. Because the FICC is 
limited to Fedwire-eligible collateral, considerable volume in the 
NCCBR segment is backed by collateral that is generally considered to 
be riskier, such as private-label asset backed securities (ABS) and 
corporate debt.21 22 This collateral will comprise a larger 
share of the NCCBR segment after the migration of Treasury repo to 
central clearing. Similarly, the FICC imposes certain limits on direct 
membership that ensure only sounder counterparties can become direct 
and sponsoring members. Thus, after the SEC's central clearing rules 
are fully implemented, the remaining trades in the NCCBR segment will 
generally be conducted by riskier counterparties.
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    \21\ For more detailed information on the use of non-Treasury 
collateral in the NCCBR market segment, see Baklanova, Caglio, 
Cipriani, and Copeland. ``The Use of Collateral in Bilateral 
Repurchase and Securities Lending Agreements.'' Federal Reserve Bank 
of New York Staff Reports, no. 758, 2016: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr758.pdf; Hempel, Kahn, Paddrik, and Mann. 2023. ``Why is so much 
Repo Not Centrally Cleared? '' Brief no. 23-01, Washington, DC: 
Office of Financial Research, May 12, 2023: https://www.financialresearch.gov/briefs/2023/05/12/why-is-so-much-repo-not-centrally-cleared/.
    \22\ FICC is currently the sole provider of clearance and 
settlement services for U.S. Treasury securities.
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    Impact on the size of the NCCBR segment: The Office expects the 
size of the NCCBR segment to shrink significantly when most Treasury -
collateralized repo activity moves to central clearing. Although there 
is uncertainty associated with the effect of the SEC's central clearing 
rules on the structure of the repo market, the Office expects the rules 
to change the scope of the transactions reported under the Final Rule 
due to the reduction in the total volume of transactions in the NCCBR 
segment. In the NPRM, the Office estimated that the proposed rules' 
coverage of the NCCBR segment would be greater than 90%; using the same 
methodology, this segment coverage would decline to 75% after 
implementation of the SEC's central clearing rules.
    However, because the NCCBR segment will materially change following 
full implementation of the SEC's central clearing rules, different 
estimation methodologies might be warranted. Accordingly, the Office 
developed two additional estimates. The first estimate assumes that all 
Treasury-collateralized repo activity moves into central clearing 
following full implementation of the SEC's central clearing rules. The 
second estimate assumes a modest amount of Treasury-collateralized repo 
remains in NCCBR. Certain exemptions to the SEC's central clearing 
rules make this modest amount realistic, as discussed below.
    In the first estimate, the collection would cover 56% of the 
remaining NCCBR segment volume. The Office believes that this scenario 
is unlikely because it assumes that all Treasury repo will migrate to 
central clearing. In the second estimate, the collection would cover 
75% of NCCBR volume if as little as 15% of the Treasury volume remains 
in the NCCBR segment. The assumption that 15% of volume remains is 
reasonable because certain Treasury-collateralized repo transactions 
are exempt from the SEC central clearing rules, including certain 
inter-affiliate trades. The Office's 2022 NCCBR pilot data collection 
suggests that the percentage of total NCCBR trading volume that is 
inter-affiliate may be much greater than 15%.
    In addition, other Treasury repo transactions may be exempt from 
central clearing because they are not allowed under the FICC's 
sponsored clearing model. For example, trades with embedded 
optionality, such as open repos, are not allowed in sponsored repo, and 
it is uncertain how many of those trades will remain in the NCCBR 
segment after full implementation of the SEC's central clearing rules. 
Exceptions to the SEC's central clearing rules could therefore result 
in the collection covering more than 75% of the remaining NCCBR volume.
    Under these two estimates, the NCCBR market segment would shrink 
from $2.3 trillion daily outstanding volume as of Q4 2021 to between 
roughly $300 billion and $600 billion daily outstanding volume. 
Although this will be a significant reduction in the size of the NCCBR 
segment, the Office believes a market of this size is large enough to 
warrant continued monitoring in light of the risks particular to this 
segment, as highlighted above and considered further below. A number of 
multibillion-dollar market segments are important to financial 
stability and are subject to reporting. For example, the Office 
currently collects information on the centrally cleared tri-party 
segment of the market, conducted under FICC's General Collateral 
Finance (GCF) Repo Service, which had $450 billion outstanding on 
January 22, 2024. While the GCF segment is similar in magnitude to what 
the Office projects for the NCCBR collection subsequent to the 
implementation of the SEC's central clearing rules, collateral quality 
is much lower in the NCCBR segment, because GCF is limited to Treasury 
and agency collateral. Further, counterparty risk in NCCBR is higher 
both because of the presence of a central counterparty in

[[Page 37095]]

GCF and because FICC imposes limits on direct membership.
    Additionally, although the sizes of exposures to the NCCBR segment 
are likely to be smaller once the SEC's central clearing rules are 
implemented, exposures of this scale can still pose risks to financial 
stability. For example, the Council's Hedge Fund Working Group found 
that the failure of Archegos Capital, which had approximately $30 
billion in capital borrowed through total return swaps that are in many 
ways similar to NCCBR transactions, ``transmitted material stress to 
large, interconnected financial institutions.'' \23\
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    \23\ Financial Stability Oversight Council Press Release, 
February 4, 2022: https://home.treasury.gov/news/press-releases/jy0587 (accessed January 24, 2024).
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    Impact on the collection's coverage of the NCCBR segment: As stated 
above, the Office expects that the collection will cover between 56% 
and 75% of the transaction volume that remain in the NCCBR market 
segment. Because overall volumes in the NCCBR segment will decrease, 
the Office also expects the number of covered reporters to decrease. 
The Office estimates the number of covered reporters to decrease from 
40 to 6 to 15, respectively, under the two estimates described above.
    Notwithstanding these changes, the Office believes collecting this 
data remains important. The remaining entities in this market will 
continue to be the largest participants in the repo market, and this 
market will still make up a material portion of their balance sheets, 
so capturing this exposure will be important for monitoring how 
financial stress in the NCCBR segment might spill over into the other 
segments of the repo market. The Office continues to view the $10 
billion exposure threshold as a reasonable size for a financial company 
to be considered material in this segment and notes that although the 
NPRM included a question on this threshold, no commenters expressed 
concern with this number. Additionally, the Office believes that 
reporting by Category 1 and Category 2 covered reporters (as discussed 
below) with exposures above this threshold will provide material 
coverage of the NCCBR segment to monitor risks without imposing undue 
reporting burdens on the industry.
    As further support for maintaining the $10 billion materiality 
threshold proposed in the NPRM, the Office notes that even exposures 
below the $10 billion threshold can have financial stability 
consequences, especially in short-term funding markets such as the repo 
market where run risk is present. For instance, the run on the Reserve 
Primary Fund, a money market mutual fund that failed to redeem 
investors at the $1.00 net asset value per share in September 2008 
following the collapse of Lehman Brothers, was triggered by the fund's 
exposure to $785 million of commercial paper issued by Lehman Brothers. 
This exposure was far less than the Office's aggregate repo cash 
borrowing threshold of $10 billion in NCCBR, yet the Reserve Primary 
Fund contributed materially to a crisis of confidence in the financial 
system. The risks were illustrated by a 2013 study that found an 
additional 20 money market mutual funds faced par redemption challenges 
similar to the Reserve Primary Fund during the same week.\24\ While 
those money market mutual fund exposures may have varied, the financial 
instability resulted from a source much smaller than the materiality 
threshold in the Final Rule.
---------------------------------------------------------------------------

    \24\ McCabe, P.E., Cipriani, M., Holscher, M. and Martin, A., 
2013. ``The Minimum Balance at Risk: A Proposal to Mitigate the 
Systemic Risks Posed by Money Market Funds.'' Brookings Papers on 
Economic Activity, 2013(1), pages 211-278.I think.
---------------------------------------------------------------------------

    Impact on the Office's overall coverage of the repo market: The 
combination of the SEC's central clearing rules and the Office's NCCBR 
data collection will significantly improve visibility into transactions 
that currently take place in the NCCBR segment. While the SEC's rules 
will have the effect of channeling more Treasury repo transactions into 
central clearing, the Office's Final Rule will cover data gaps that 
currently exist and could develop in NCCBR. Additionally, the Final 
Rule will provide transparency with respect to potential future market 
changes. An example of such a change is guaranteed repo, which could 
emerge as an alternative to centrally cleared repo. The Final Rule will 
provide insight into any changes in the size of the NCCBR market 
segment. Further, the Final Rule will provide transparency into repo 
activity involving collateral that is not eligible for central 
clearing. Therefore, after the implementation of the SEC's central 
clearing rules, the NCCBR collection will continue to fill a critical 
data gap because without the collection, regulators would have limited 
insight into risks in this segment.
II(c)(2) SEC's Expansion of Dealer Registration Requirements
    On February 6, 2024, the SEC adopted new rules to further define 
the phrase ``as a part of a regular business'' as used in the statutory 
definitions of ``dealer'' and ``government securities dealer.'' \25\ 
These new rules could affect the collection under the Final Rule 
because, as described in the NPRM and below, registered dealers and 
government securities dealers are subject to the requirement to report 
their transactions to the Office if their NCCBR activity exceeds the 
materiality threshold in the Final Rule. While the SEC's recent 
amendments will expand the population of dealers and government 
securities dealers, those changes are unlikely to expand the number of 
NCCBR covered reporters at this time, because companies that are newly 
defined as dealers or government securities dealers are unlikely to 
pass the materiality threshold in the Final Rule. The Office expects 
that substantially all newly registered dealers and government 
securities brokers and dealers will be either principal trading firms 
(PTFs) or hedge funds employing high-frequency trading (HFT) 
strategies. In both cases, these firms employ strategies that involve 
rapid trading throughout the day, matching buyers and sellers, and 
exploiting spreads between bid and ask prices. For firms that do not 
carry significant inventories, like some PTFs or HFTs, participation in 
repo is likely negligible since they have no inventories to fund. As a 
result, the Office expects that few, if any, of the additional firms 
registering as dealers or government securities dealers under the SEC's 
recent amendments will be subject to NCCBR reporting, so the 
implementation of these SEC rules should have limited effect on the 
NCCBR collection.
---------------------------------------------------------------------------

    \25\ Further Definition of `As a Part of a Regular Business,' 89 
FR 14938. https://www.federalregister.gov/d/2024-02837.
---------------------------------------------------------------------------

II(d) Uses of the Data Collection

    The data to be collected pursuant to the Final Rule will be used by 
the Office to fulfill its purpose, responsibilities, and duties under 
Title I of the Dodd-Frank Act, including improving the Council's and 
Council member agencies' monitoring of the financial system and 
identification and assessment of potential financial stability risks. 
The data reported in this collection will facilitate the identification 
and evaluation of potential repo market vulnerabilities and trends that 
could be destabilizing or indicate stresses in the financial system. 
For example, risks might be reflected in indicators of the volume or 
cost of funding in the repo market, differentiated by the type and 
credit quality of participants, quality of underlying collateral, and 
tenor of

[[Page 37096]]

transactions. Analyzing the collateral data from this collection 
together with other available data will enable a clearer understanding 
of collateral flows in securities markets and associated potential 
financial stability risks.
    One use of the data will be to monitor the transition between the 
time that the NCCBR collection commences and when, under the SEC's 
central clearing rules, certain Treasury repo trades will be required 
to migrate to central clearing.\26\ The NCCBR collection will provide 
contemporaneous information to regulators and policymakers on the 
progress of market participants in moving to central clearing. Because 
the SEC's central clearing rules will involve significant changes in 
market structure and there is uncertainty regarding how markets will 
respond to its implementation, this information on progress and risks 
associated with the transition will be invaluable.
---------------------------------------------------------------------------

    \26\ The Final Rule requires that a ``covered reporter whose 
volume falls below the $10 billion threshold for at least four 
consecutive calendar quarters would have its reporting obligations 
cease.'' As a result, the Office expects to collect data from 
approximately 40 reporters until as late as June 2027, 12 months 
after the SEC's June 30, 2026, compliance date for central clearing 
of Treasury repo trades.
---------------------------------------------------------------------------

    The Office may also use the data to sponsor and conduct additional 
research. This research may include using these data to help fulfill 
the Office's duties and purposes under the Dodd-Frank Act relating to 
the responsibility of the Office's Research and Analysis Center to 
support the Council.\27\ For example, access to data on NCCBRs will 
allow the Office to conduct research related to the Council's 
monitoring of potential risks arising from securities financing 
activities and nonbank financial companies.
---------------------------------------------------------------------------

    \27\ 12 U.S.C. 5344(c) discusses the various uses of data by the 
Office's Research and Analysis Center, and 12 U.S.C. 5344(b) 
discusses the duties of the Office's Data Center, on behalf of the 
Council.
---------------------------------------------------------------------------

    As noted in the NPRM, and consistent with the Dodd-Frank Act, the 
Office may share the data collection and information with the Council, 
Council member agencies, and the Bureau of Economic Analysis and will 
also make the data available to the Council and member agencies as 
necessary to support their regulatory responsibilities. The NPRM also 
noted that data and information shared as described above must be 
maintained with at least the same level of security as used by the 
Office and may not be shared with any individual or entity without the 
permission of the Council. Such sharing will be subject to the 
confidentiality and security requirements of applicable laws, including 
the Dodd-Frank Act.\28\ Pursuant to the Dodd-Frank Act, the submission 
of any non-publicly available data to the Office under this collection 
will not constitute a waiver of or otherwise affect any privilege 
arising under federal or state law to which the data or information is 
otherwise subject.\29\
---------------------------------------------------------------------------

    \28\ 12 U.S.C. 5343(b), 5344(b)(3).
    \29\ 12 U.S.C. 5322(d)(5).
---------------------------------------------------------------------------

    After consulting with Council member agencies as consistent with 
the Dodd-Frank Act, the Office further advised in the NPRM that certain 
data, including aggregate or summary data from this collection, may be 
provided to financial industry participants and the general public to 
increase market transparency and facilitate research on the financial 
system. In doing so, it is important that intellectual property rights 
are not violated, business confidential information is properly 
protected, and the sharing of such information poses no significant 
threats to the U.S. financial system.\30\
---------------------------------------------------------------------------

    \30\ 12 U.S.C. 5344(b)(6).
---------------------------------------------------------------------------

    Commenters identified concerns about data privacy and security, 
anonymization, and aggregation of the data when disclosing data as 
described above. One commenter encouraged the Office to require in the 
Final Rule that data be anonymized and aggregated prior to being 
disclosed to the public. One commenter stated that anonymization and 
aggregation of publicly reported data was required to prevent covered 
reporters from violating privacy regulations or contractual 
confidentiality terms. Other commenters indicated that disclosure of 
data not anonymized or aggregated could lead to negative effects for 
markets and market participants and depending on the timing and nature 
of the disclosure, disclosure of even aggregate repo transactions could 
inadvertently reveal proprietary information of financial companies. 
One comment letter recommended that the Office consult in advance with 
market participants regarding the timing and granularity of any 
disclosure. Another commenter recommended that public disclosure occur 
after two business days from the date of the report.
    The Office reiterates that data will be available to the public and 
financial industry participants only to the extent that intellectual 
property rights are not violated, business confidential information is 
properly protected, and the sharing of such information poses no 
significant threats to the U.S. financial system.\31\ The Office 
further confirms that it will not disclose raw data to the public and 
that any work product disclosed to the public will consist only of 
anonymized, aggregated, or otherwise masked data.
---------------------------------------------------------------------------

    \31\ 12 U.S.C. 5344(b)(6).
---------------------------------------------------------------------------

    One comment letter requested that the Office clarify how it will 
anonymize the aggregated data for public reporting. The Office employs 
a number of techniques to protect underlying raw data from public 
disclosure, including the use of anonymization, summaries, aggregation, 
masking, compliance with applicable data security and privacy laws, and 
compliance with internal review and approval protocols designed to 
protect the underlying data from public disclosure.
    One commenter recommended that when sharing data from the 
collection with other regulators, the Office should make clear that the 
information is confidential and subject to all applicable laws and 
regulations regarding subsequent sharing of the information. The 
commenter also recommended that Office employees and consultants be 
subject to additional confidentiality requirements regarding the use or 
dissemination of data collected under the Final Rule. Another comment 
letter requested that the Office specify any IT security protocols that 
will be used to guarantee the security of the data that will be 
collected. The Office has a statutory responsibility to ensure that 
data collected by the Office is kept securely and protected from 
unauthorized disclosure; and data shared with other regulatory agencies 
must be maintained with at least the same level of security as is used 
by the Office.\32\ Additionally, for purposes of preventing 
unauthorized access to data or loss of data, the Federal Information 
Security Modernization Act of 2014 (FISMA) requires that federal 
agencies, including the Office and federal regulatory agencies, provide 
information security protections commensurate with the risk and 
magnitude of harm resulting from unauthorized access, use, or 
disclosure of information collected by or on behalf of an agency. The 
information collected pursuant to the Final Rule will be handled in 
accordance with the Office's data access, security, and control 
policies and procedures. The Office will comply with applicable privacy 
and data protection laws and regulations, including but not limited to 
FISMA, and will require that any regulatory agencies that receive 
business confidential information utilize appropriate confidentiality 
and security protocols in

[[Page 37097]]

compliance with FISMA and other applicable laws.
---------------------------------------------------------------------------

    \32\ 12 U.S.C. 5343(b)(1) and 12 U.S.C. 5344(b)(3).
---------------------------------------------------------------------------

III. Collection Design

    The regulatory text lists the requirements specifically relevant to 
this collection. This includes a table describing the data elements 
that covered reporters will be required to submit. As outlined below, 
the Office is publishing reporting instructions and technical guidance 
on the Office's website regarding matters such as data submission 
mechanics and formatting in connection with the Final Rule.

III(a) Scope of Entities

    The Final Rule establishes the scope of entities subject to 
reporting. Specifically, reporting is required by financial companies 
(as defined in the Final Rule) that fall within either of two 
categories:
     Category 1: a securities broker, securities dealer, 
government securities broker, or government securities dealer whose 
average daily outstanding commitments to borrow cash and extend 
guarantees in NCCBR transactions with counterparties over all business 
days during the prior calendar quarter is at least $10 billion,\33\ and
---------------------------------------------------------------------------

    \33\ The terms broker and dealer are defined in 15 U.S.C. 
78c(a)(4) and (5), respectively. Broker and dealer registration 
requirements are contained in 15 U.S.C. 78o. The terms government 
securities broker and government securities dealer are defined in 15 
U.S.C. 78c(a)(43) and (44), respectively. Government securities 
broker and government securities dealer registration requirements 
are contained in 15 U.S.C. 78o-5.
---------------------------------------------------------------------------

     Category 2: any financial company that is not a securities 
broker, securities dealer, government securities broker, or government 
securities dealer and that has over $1 billion in assets or assets 
under management, whose average daily outstanding commitments to borrow 
cash and extend guarantees in NCCBR transactions, including commitments 
of all funds for which the company serves as an investment adviser, 
with counterparties that are not securities brokers, securities 
dealers, government securities brokers, or government securities 
dealers over all business days during the prior calendar quarter is at 
least $10 billion.
    The Office intends to consider a financial company to have assets 
or assets under management exceeding $1 billion if the company meets 
one or more of the following criteria:
     if the firm is an investment adviser registered pursuant 
to the Investment Advisers Act of 1940 provides continuous and regular 
supervisory or management services to securities portfolios valued in 
the aggregate at $1 billion or more in assets under that law;
     if the firm files a required disclosure of its balance 
sheet with a federal or state financial regulator and has more than $1 
billion in assets under any such disclosure;
     if the firm discloses its assets to investors or creditors 
in audited financial statements, and has more than $1 billion in assets 
under that disclosure;
     if the firm has disclosed assets in filings with the 
Internal Revenue Service and has more than $1 billion in assets under 
that disclosure.
    As noted in the NPRM, the Office distinguishes between assets and 
assets under management in the criteria above in light of the manner in 
which an agent acts on the part of other parties. Investment advisers 
provide investment management services as fiduciaries, using a wide 
variety of models and vehicles. They engage in activities such as 
entering into repo, acting as cash borrowers, and buying and selling 
derivatives on behalf of clients. These activities can take place at 
the managed fund or portfolio level or at the adviser level with the 
resulting trades subsequently allocated to their managed funds or 
portfolios. Unlike other financial companies, the value of these assets 
is not fully reflected on the balance sheet of the adviser. As a 
result, the use of assets under management better represents the market 
value of investment activities provided and should be used in the 
threshold computation.
    The Office received several comments relating to investment 
advisers within the framework of the proposed rules. One commenter 
stated that reporting by an investment adviser based on its aggregate 
assets under management is inappropriate, as investment advisers merely 
execute investment strategies on behalf of their managed funds, with 
each fund having an individualized strategy that may include repo 
transactions. It further stated that trading of fund assets and 
positions is never executed with the adviser as the principal obligor, 
but rather must be allocated to the appropriate fund as the principal 
obligor. The commenter suggested that the Office instead use the assets 
under management of individual funds since, notwithstanding any 
execution of trades on a bunched or similar basis, each individual fund 
is the principal obligor, and the investment adviser must act 
consistent with each fund's investment strategy. As the commenter 
acknowledged, trading may be executed on a bunched basis across 
multiple funds to obtain consistent pricing for each fund with 
allocation to individual funds to follow, consistent with the Office's 
stated reasoning for aggregating assets across funds in the calculation 
of assets under management. These transactions are conducted on the 
adviser level, and the Office believes that limiting the threshold 
calculation to individual funds would lead to an incomplete picture of 
the repo market, because the data would no longer contain the necessary 
context for determining the financial stability risks implied by an 
investment adviser's transactions. For example, margining practices are 
a risk the collection may be used to monitor. Since haircuts are a 
transaction term often negotiated at the level of the investment 
adviser, it is important to have the full set of transactions 
negotiated with a given haircut to assess the riskiness of margining 
practices. For these reasons, the Office does not consider the issue of 
principal obligor status to be important for the purposes of this type 
of monitoring.
    Another commenter asserted that investment advisers to private 
funds are already subject to significant oversight and compliance 
obligations and, in the context of systemic risk, report extensive 
information on Form PF regarding collateral and counterparty exposures, 
among other information. They also stated that the scope of entities 
covered by the proposed rules would result in duplicative and costly 
reporting requirements on investment advisers, which, in turn, would 
dilute the quality of the data reported and increase costs to funds' 
investors. However, although investment advisers may be subject to 
other oversight and compliance obligations as noted in the NPRM, based 
on its review of existing data collections, the Office has found no 
other transaction-level, daily collection of this data. Moreover, 
commenters on the NPRM did not identify a duplicative data collection 
at this level of granularity and frequency that would otherwise enable 
the Office adequately to monitor financial stability risks in this 
market.
    Another commenter similarly suggested that registered investment 
advisers (RIAs) be excluded from eligibility for Category 2 reporting, 
and that Category 1 be extended to include banking entities. The 
commenter stated that if Category 1 were to be extended in such a 
manner, an RIA would be unlikely to undertake covered transactions with 
a financial company that was not in Category 1, and as a result, the 
inclusion of RIAs in Category 2 would be redundant. It also asserted 
that if Category 1 were not extended to include banking entities, the 
potential for an RIA to become subject to Category

[[Page 37098]]

2 reporting could lead to Category 2 entities generally preferring to 
transact with Category 1 entities (where this does not impact the price 
at which they transact), leading to distortions. Accordingly, it 
suggested that excluding RIAs from Category 2 would not ultimately 
reduce the effectiveness of the Office's data collection. However, this 
commenter provided no data to support this assertion, and the Office 
sees such concerns about trading preferences as speculative in nature. 
In relation to this commenter's proposal to extend the definition of 
Category 1 covered reporters, the Office has declined to add banking 
entities to the enumerated categories of entities contained in Category 
1, as discussed below. Additionally, given the gaps in visibility into 
this market, the risks from leveraged funds that are operated by RIAs, 
and the potential for future developments in this market that shift 
activity away from traditional intermediaries, the Office continues to 
view the collection of data from RIAs as essential to its ability to 
effectively monitor financial stability risks.
    Several commenters stated that inter-affiliate repo transactions 
should not be required to be reported and should not count toward the 
Category 1 and Category 2 covered reporter thresholds. One commenter 
noted that inter-affiliate transactions occur for operational reasons, 
and another commenter noted that these transactions are typically risk 
transfers with no market impact. They additionally suggested that data 
on transactions between affiliates would not be useful for 
understanding the repo market. The Office believes that reporting on 
these trades can provide insight into the fragilities and sources of 
financing within entities and between financial companies. 
Additionally, in contrast to the views expressed by the commenters, 
recent research shows that transactions between affiliates can play an 
important role in repo markets.\34\ Information on these transactions 
is important for risk monitoring purposes. For instance, large 
transfers of cash from banks to affiliated dealers can indicate 
decreasing liquidity for dealers that could be an early warning 
indicator of stress. Another example of inter-affiliate transactions 
that are important to monitor from a financial stability perspective 
are those in which broker-dealers engage in centrally cleared trades on 
behalf of affiliated asset managers and then conduct back-to-back non-
centrally cleared legs between the broker-dealers and the affiliated 
asset managers. While one commenter stated that collecting data on 
these types of transactions would be duplicative of information already 
collected by FICC, it is in fact an example of the importance of 
collecting inter-affiliate transactions, because exposures to repo 
would be incorrectly attributed to broker-dealer affiliates instead of 
asset managers without data on this back-to-back leg. As the Office's 
intention is to collect information on the full scope of financial 
activity in repo markets and inter-affiliate transactions are valuable 
for financial stability monitoring, inter-affiliate transactions are to 
be considered when calculating Category 1 and Category 2 reporting 
thresholds and should be reported.
---------------------------------------------------------------------------

    \34\ See Ricardo Correa, Wenxin Du, and Gordon Y. Liao, 2020. 
``U.S. Banks and Global Liquidity,'' International Finance 
Discussion Papers 1289, Board of Governors of the Federal Reserve 
System (U.S.); and Cecilia R. Caglio, Adam Copeland, and Antoine 
Martin, 2021. ``The Value of Internal Sources of Funding Liquidity: 
U.S. Broker-Dealers and the Financial Crisis,'' Staff Reports 969, 
Federal Reserve Bank of New York.
---------------------------------------------------------------------------

    Another commenter suggested that other categories of potential 
covered reporters be removed from the rules' coverage. The commenter 
stated that subjecting buy-side entities, such as advisers of private 
funds that predominantly enter into transactions with financial 
intermediaries like broker-dealers or banks or their affiliates, to 
reporting would be unwarranted. The Office understands that, at 
present, the majority of NCCBR transactions involving private funds, 
funds managed by RIAs, and other buy-side entities is likely conducted 
with Category 1 counterparties. However, as noted in the NPRM, without 
a comprehensive collection, the extent of transactions without a 
Category 1 counterparty is not knowable. Additionally, even if today it 
is unlikely that an investment adviser, adviser to a private fund, or 
other buy-side financial company would undertake a transaction with a 
non-Category 1 financial company, the NPRM explicitly noted the 
Office's intention to cover potential future changes in repo market 
structure. These may include peer-to-peer repo that bypasses Category 1 
financial companies.
    Another commenter suggested that money market funds and mutual 
funds be exempted from reporting because such funds do not generally 
enter repo transactions in the role of borrower and are unlikely to 
have outstanding commitments to borrow cash in the bilateral repo 
markets that meet the reporting threshold. The Office agrees that money 
market funds are generally unlikely to borrow cash in repo markets and 
generally do not play roles resembling intermediaries in these markets, 
and the Office does not generally expect money market funds to fall 
within the scope of Category 1 or Category 2. However, mutual funds 
have been known to borrow in repo markets. To the extent an adviser for 
mutual funds may manage a number of investment vehicles or 
relationships that in the aggregate could exceed the reporting 
threshold, including them in the data collection would enhance the 
ability of the collection to provide information regarding run risks 
and liquidity risks.\35\
---------------------------------------------------------------------------

    \35\ See Antoine Bouveret, Antoine Martin, and Patrick E. 
McCabe, 2022. ``Money Market Fund Vulnerabilities: A Global 
Perspective,'' Staff Reports 1009, Federal Reserve Bank of New York; 
and Antoine Bouveret and Jie Yu, 2021. ``Risks and Vulnerabilities 
in the U.S. Bond Mutual Fund Industry,'' Working Paper 21/109, 
International Monetary Fund.
---------------------------------------------------------------------------

    Several commenters suggested that the Office add banks to the set 
of financial companies covered by Category 1. One commenter stated that 
while U.S. broker-dealers represent a significant proportion of market 
activity, sizable positions are also maintained by foreign and domestic 
banks, including U.S. branches of foreign banks. Another commenter 
stated that there would be duplicative reporting from asset managers 
and funds if banks are included in Category 1. The Office has attempted 
in the structure of the Final Rule to limit duplicative reporting by 
financial companies. For instance, the exclusion of brokers and dealers 
from the reporting threshold calculation for Category 2 limits the 
scope of Category 2 covered reporters. However, requiring Category 2 
companies to remove transactions with Category 1 companies from their 
reports under the Final Rule could increase their reporting burdens. In 
some cases, determining whether a transaction has already been reported 
may be more costly for covered reporters than simply reporting the 
duplicate transaction. Additionally, the Office notes that reducing the 
potential for dual reporting by assigning reporting responsibility 
solely to the dealer would not be possible in cases where the dealer is 
not subject to reporting requirements, such as a dealer that is not a 
U.S. financial company. Therefore, in the interest of keeping the 
determination of reporting obligations clear, the Office will continue 
with the reporting structure as outlined in the NPRM.
    Another commenter suggested that the reporting burden would be 
lower if banks were included in Category 1 because banks may be 
affiliated with other Category 1 covered reporters. Commenters noted 
that if banks were

[[Page 37099]]

included in Category 1, transactions with banks would be excluded from 
the Category 2 threshold calculation, making it less likely that 
certain financial companies would qualify as Category 2 covered 
reporters. Two comment letters also asserted that if Category 1 is not 
expanded to include banks, it could lead to migration of repo trades 
from other entities to Category 1 financial companies.
    The NPRM included within Category 1 SEC-registered brokers, 
dealers, government securities brokers, and government securities 
dealers. While many repo transactions by financial companies occur with 
counterparties other than those types of entities included in Category 
1, the Office believes that the vast majority of transactions occur 
with Category 1 entities.
    Analysis by the Office of data from call reports suggests that over 
90% of gross repo by U.S. depository institutions is conducted by 
depository institutions that are registered as government securities 
dealers. Therefore, as stated in the NPRM, the Office continues to 
believe that nearly all NCCBR trades are intermediated by either 
dealers or are intermediated by financial companies that may be 
required to report under the Category 1 criteria, such as government 
securities dealers.\36\ As such, the Office believes that any 
duplicative reporting from asset managers and others resulting from the 
exclusion of banks from Category 1 would be minimal. Additionally, 
unless incorporated or organized under federal or state law, U.S. 
branches of foreign banks are not considered financial companies as 
defined under the Final Rule. As a result, submissions by Category 2 
covered reporters under the Final Rule would be the only way these 
trades would be reported to the Office. Additionally, in relation to 
the repo activities for foreign banks, as the NPRM noted, because of 
the lack of transparency in the existing market and the possibility of 
trades that bypass traditional intermediaries,\37\ it is essential to 
include financial companies that are large cash borrowers from sources 
other than Category 1 to ensure a robust framework for monitoring 
financial stability in the repo market going forward.
---------------------------------------------------------------------------

    \36\ 88 FR 1154, 1163.
    \37\ Id.
---------------------------------------------------------------------------

    One commenter suggested that RIAs be excluded from the Final Rule 
if Category 1 were extended to include banking entities. The commenter 
also noted that it would be unlikely that a fund managed by an RIA 
would undertake a covered transaction with an entity that was not in 
Category 1 and therefore, the inclusion of RIAs in Category 2 would be 
redundant. As discussed above, the Office has not added banking 
entities to Category 1. Nevertheless, the Office understands that it 
may be likely that RIAs currently conduct the majority of their NCCBR 
transactions with Category 1 financial companies, including banking 
entities' affiliates that are registered government securities dealers. 
However, without a comprehensive data collection, the extent of 
transactions without a Category 1 counterparty is unknown. 
Additionally, even if it is unlikely a fund managed by an RIA would 
undertake a transaction with a non-Category 1 financial company, the 
Office in the NPRM explicitly stated its intention to cover potential 
future expansions in repo such as peer-to-peer repo that bypasses 
Category 1 financial companies. To the extent that funds managed by 
RIAs engage in repo transactions exclusively with Category 1 entities, 
they would not be covered reporters under Category 2. However, if RIAs 
were to be excluded entirely from the Final Rule, any transactions with 
counterparties outside of Category 1 would not be captured, leaving a 
crucial gap in the ability of regulators to effectively monitor 
financial stability risks in this market.
    The same commenter asserted that banking entities should be added 
to Category 1 because the definition of ``financial company'' used in 
12 U.S.C. 5381 is limited because it relates to the operation of the 
Orderly Liquidation Authority under Title II of the Dodd-Frank Act. As 
a result, the commenter stated, such term should instead reference the 
definition in 12 U.S.C. 5344. For the reasons stated above, the Office 
has declined to add banking entities to Category 1.
    One commenter also requested clarification on several points of 
interpretation related to Category 1 financial companies. First, the 
commenter incorrectly asserted that the NPRM's preamble text indicated 
that the reporting requirements would only apply in the context of a 
covered reporter that is a cash borrower, and that they believed that 
the Office intended to limit Category 1 to the enumerated financial 
companies when acting as cash borrowers and requested confirmation of 
such an understanding. Notwithstanding the fact that the same section 
of the NPRM also explicitly included the extension of guarantees within 
the transactional threshold applicable to Category 1 financial 
companies, the regulatory text in both the NPRM and the Final Rule 
makes clear that Category 1 is not limited to financial companies when 
acting as cash borrowers, but also includes financial companies when 
extending guarantees.
    Second, the commenter noted that one instance of the description of 
Category 1 financial companies in the preamble to the NPRM did not 
explicitly reference the $10 billion materiality threshold and asked 
whether the Office intended to include a materiality threshold in both 
categories of financial companies. The NPRM and the Final Rule make 
clear that the $10 billion threshold applies to both Category 1 and 
Category 2 financial companies.
    Third, the commenter requested clarification as to whether Category 
1 is intended to cover only principal transactions (and not agency 
transactions) by financial companies. Consistent with the explanation 
in the NPRM, the Category 1 calculation should include obligations of 
the financial company and guarantees extended by the financial company. 
For purposes of calculating the Category 1 threshold, a financial 
company should exclude transactions in which it acts as an agent--such 
that it incurs no obligation and extends no guarantee. Unlike 
investment advisers, the Office is not aware of dealers, brokers, 
government securities dealers, or government securities brokers that 
package their trades together with those of their clients that use the 
dealers or brokers as their agent. The case in which a Category 1 
financial company acts as an agent for a customer but not as an 
investment adviser is therefore distinct from the case of investment 
advisers conducting batched trades on behalf of the funds they advise 
as described above.
    Fourth, the commenter requested clarification as to whether, when a 
financial company is registered as a government securities broker or 
dealer for certain limited activities, the proposed rules would apply 
only to those certain limited activities of the registered financial 
company or whether all activity of the financial company would be 
captured by the Category 1 calculation. As set forth in the regulatory 
text in both the NPRM and the Final Rule, all commitments to borrow 
cash or extend guarantees in NCCBR transactions should be included in 
the determination of total commitments for the purposes of reporting, 
regardless of whether the firm is acting in its capacity as a 
government securities broker or dealer or in some other capacity. 
Similarly, all

[[Page 37100]]

commitments to borrow cash or lend cash in repo or transactions where 
guarantees are extended by the firm should be reported to the Office.
    Finally, the commenter requested clarification, for the purpose of 
determining the $10 billion threshold in Category 2, about whether 
foreign banks and foreign broker-dealers should be treated as Category 
1 financial companies and how transactions should be considered if the 
foreign entity is an affiliate of a U.S. bank or broker-dealer. As set 
forth in the Final Rule, for purposes of calculating the $10 billion 
threshold, potential Category 2 covered reporters should exclude repo 
borrowing and guarantees extended to counterparties that are securities 
brokers, securities dealers, government securities brokers, or 
government securities dealers (as each such term is defined in the 
Final Rule), regardless of whether those counterparties are Category 1 
covered reporters. If a counterparty is an affiliate of a securities 
broker, securities dealer, government securities broker, or government 
securities dealer (as each such term is defined in the Final Rule), but 
is not one of these types of financial companies, transactions with the 
counterparty should be included in the calculation of the Category 2 
threshold.

III(b) Scope of Transactions

    Consistent with the NPRM, the Final Rule defines a non-centrally 
cleared bilateral repurchase agreement transaction as an agreement in 
which one party agrees to sell securities to a second party in exchange 
for the receipt of cash, and the simultaneous agreement of the former 
party to later reacquire the same securities (or any subsequently 
substituted securities) from that same second party in exchange for the 
payment of cash; or an agreement of a party to acquire securities from 
a second party in exchange for the payment of cash, and the 
simultaneous agreement of the former party to later transfer back the 
same securities (or any subsequently substituted securities) to the 
latter party in exchange for the receipt of cash. In all cases, the 
agreement neither involves a tri-party custodian nor is cleared through 
a central counterparty. This definition includes, but is not limited 
to, transactions that are executed under a Master Repurchase Agreement 
(MRA) or Global Master Repurchase Agreement (GMRA), or which are agreed 
to by the parties as subject to the provisions of 11 U.S.C. 559. 
Notwithstanding the above, transactions conducted under a Securities 
Lending Agreement (SLA), a Master Securities Lending Agreement (MSLA), 
or Global Master Securities Lending Agreement (GMSLA) are not 
considered repurchase agreements, nor are repurchase agreements arising 
from either participation in a commercial mortgage loan or the initial 
securitization of a residential mortgage loan. The Office has chosen to 
exclude SLA, MSLA, and GMSLA transactions from the Final Rule because 
reporting of data related to such transactions to the Office could be 
redundant (and therefore unnecessary) in light of the required 
reporting of securities lending information to a registered national 
securities association as provided for in the SEC's recent securities 
lending transparency rules.\38\
---------------------------------------------------------------------------

    \38\ Securities and Exchange Commission. Reporting of Securities 
Loans, Final Rule, 88 FR 75644 (Nov. 3, 2023). https://www.federalregister.gov/d/2023-23052.
---------------------------------------------------------------------------

    The NPRM requested comment on whether sell/buy-back transactions 
should be excluded from the Final Rule. While sell/buy-back agreements 
accomplish similar goals to repo transactions, the Office proposed not 
to include sell/buy-back agreements with the understanding that these 
agreements are recorded differently from MRA, GMRA, MSLA, and GMSLA 
agreements and may have different characteristics and names from the 
preceding types.\39\ In response, one commenter noted that sell/buy-
backs are now almost entirely documented (e.g., under the Buy/Sell Back 
Annex to the GMRA and a similar annex to the SIFMA MRA). Further, this 
commenter noted that differences in methods of quoting and terminology 
of sell/buy-back agreements are legacies that are insubstantial and 
have dwindled in importance. Excluding sell/buy-backs from the Final 
Rule could be costly in requiring covered reporters to distinguish 
between nearly identically documented agreements and might also enable 
covered reporters to avoid disclosing a transaction by executing such 
economically similar transactions under a different form of agreement. 
Therefore, sell/buy-back agreements are included within the scope of 
transactions covered under the Final Rule.
---------------------------------------------------------------------------

    \39\ 88 FR 1154, 1164.
---------------------------------------------------------------------------

    Several commenters posed questions regarding guarantees, 
specifically with respect to the calculation of reporting thresholds 
and whether various guarantee arrangements fall within the scope of 
reporting. As noted in the NPRM, the extension of a guarantee to a repo 
transaction replicates the profile of traditional repo intermediation 
by offsetting direct transactions with the counterparties to the 
guaranteed repo, and therefore its inclusion in the data collection is 
essential to providing regulators a complete picture of the repo 
market. Guarantees encompass any agreement pursuant to which a 
financial company that is not one of the two direct counterparties to a 
repo transaction commits to provide protection against the risk of a 
failure to perform for that repo transaction under the terms of the 
repo by one of the direct counterparties. For every transaction, 
including guaranteed repo transactions, all the data elements should be 
reported as detailed below and in the reporting instructions.
    One commenter asked whether, for purposes of determining if a 
financial company has met the position thresholds to be a covered 
reporter, the financial company should aggregate the repos in which the 
firm is a cash borrower together with the repos for which the firm is a 
guarantor on behalf of a cash borrower, and whether a separate file 
should be submitted for guarantee arrangements. The same commenter also 
asked whether a firm would be considered a covered reporter if its repo 
cash borrowings exceed the applicable threshold for the prior quarter, 
but the firm does not guarantee any repos (or the firm's repo 
guarantees do not exceed the applicable threshold). Data on guarantee 
arrangements should be submitted in the same file. The $10 billion 
threshold for Category 1 or Category 2 is calculated based on the 
aggregate combined amount of a financial company's cash borrowings in 
NCCBR transactions and the guarantees extended by the financial company 
in NCCBR transactions.
    One commenter asked whether the $10 billion threshold calculation 
include repo transactions with and guarantees extended to affiliates. A 
repo transaction or an extension of a guarantee to an affiliate creates 
an exposure of the covered reporter to its affiliate. The resulting 
risks are within scope of the Final Rule's purpose, and the transaction 
should be reported and included in the total transaction volume used 
for the Category 1 and Category 2 thresholds.
    Another commenter asked whether indemnified repo entered into as 
part of cash collateral reinvestment associated with securities lending 
should be included under guarantees. Because these transactions 
replicate the profile of offsetting legs between a securities lender 
and the securities lending agent and between the securities lending 
agent and a third party, and because the resulting risks are within 
scope of the Final Rule's purpose, this would be reported to the 
Office. However, the commenter asserted that nearly all of

[[Page 37101]]

the indemnified repo is done with Category 1 financial companies as 
counterparties or is centrally cleared. The Office notes that 
guarantees extended to centrally cleared repo transactions, sponsored 
repo transactions, and tri-party transactions are not covered by the 
scope of this Final Rule, and that transactions with Category 1 
financial companies are not included in the calculation of reporting 
thresholds for Category 2 financial companies, reducing the potential 
for duplicative reporting associated with indemnified repo.
    Two commenters requested clarification around whether ``shortfall 
guarantees,'' transactions in which a financial company offers a 
guarantee only on the uncollateralized portion of a repo, would be 
considered guarantees and if so, whether reporters should consider the 
full amount of the repo transaction being guaranteed or only the size 
of the shortfall guarantee when calculating their repo commitments. A 
shortfall guarantee replicates the exposure of an intermediary standing 
between a cash borrower and a cash lender, since repo transactions are 
all collateralized and the loss the intermediary is exposed to is the 
size of the uncollateralized portion of the repo transaction. As such, 
the resulting risks are within scope of the Final Rule's purpose and 
should be included in reporting and, since the exposure replicated is 
the same as the exposure the intermediary would undertake if it were 
intermediating the full amount of the transaction, the amount used to 
calculate a potential covered reporter's transaction volume should be 
the full amount. To illustrate, for $95 lent against a market value of 
$90 in collateral, the measurement of guarantee obligations used to 
calculate transaction volume should be reported as $95 rather than a 
shortfall exposure. Since the cash amount being guaranteed is the $95, 
rather than the shortfall value, this is considered the exposure for 
the purpose of the threshold calculation. This exposure would then be 
added to the total commitments by the borrower to borrow cash or lend 
cash in repo transactions for the purposes of calculating the total 
threshold based on repo exposure, and the repo transaction would be 
reported in the same file as other transactions. One of the commenters 
requested clarification on the manner by which a covered reporter 
should report the various data elements for a guarantee that does not 
have a specified cap, or a guarantee on behalf of a non-U.S. entity. 
For all guarantee transactions, regardless of the existence of any cap 
or whether the relevant entity is a U.S. entity, the reported data 
elements should cover the entirety of the underlying transaction.
    The NPRM noted that some transactions covered under the proposed 
rules would likely be with counterparties outside of the United States, 
noting the potential benefit of greater information on cross-border 
exposures associated with repo borrowing and the concern of potential 
circumvention.\40\ This would include transactions by the covered 
reporter settled internationally or denominated in currencies other 
than in U.S. dollars. Some commenters sought clarification of how the 
rules would apply to a U.S. branch of a foreign financial company, a 
foreign branch or affiliate of a U.S. financial company, or a 
transaction conducted internationally. As noted in the NPRM, the 
definition of ``financial company'' includes only entities that are 
incorporated or organized under Federal or state law, including 
subsidiaries. Entities that are not incorporated or organized under 
Federal or state law, or branches of entities that are not incorporated 
or organized under Federal or state law, are not subject to the Final 
Rule's reporting requirements. However, as stated in the NPRM, 
transactions conducted outside the United States by covered reporters 
are within scope, because their exclusion could allow covered reporters 
to avoid reporting by settling a transaction outside the U.S., and 
these transactions contain information on cross-border exposures that 
are relevant for financial stability monitoring.\41\ Therefore, 
transactions conducted by financial companies (as defined in the Final 
Rule) that are settled or otherwise take place outside of the United 
States as well as transactions settled in currencies other than the 
U.S. dollar are included both in the transactions reported to the 
Office and in the volumes used to determine the Category 1 and Category 
2 thresholds.
---------------------------------------------------------------------------

    \40\ 88 FR 1154, 1164.
    \41\ Id.
---------------------------------------------------------------------------

    One commenter suggested that the rules should exclude transactions 
by non-U.S. sub-advisers under the management of a U.S. adviser as well 
as de minimis transactions between Category 2 financial companies 
denominated in currencies other than U.S. dollars. This commenter 
suggested these transactions be excluded from the collection because 
such information is not relevant to regulators' understanding of the 
U.S. repo market and de minimis transactions pose little systemic risk 
to the United States. Also, they suggested that the burden of reporting 
these transactions outweighs the benefit. The Office does not agree 
with these reasons. Financial companies can flexibly utilize financing 
from sources outside the United States as needed. Excluding 
transactions of a non-U.S. sub-adviser under the management of a U.S. 
adviser or transactions denominated in other currencies could eliminate 
important information about cross-border exposures relevant to 
financial stability. Additionally, the practice of structuring 
transactions into smaller cash amounts does not remove their relevance 
to financial stability analysis. As a result, the Office declines to 
exclude these transactions. These transactions should be included both 
in the transactions reported to the Office and in the volumes used to 
determine Category 1 and Category 2 disclosure thresholds.

III(c) Information Required

    Pursuant to Sec.  1610.11(c) of the Final Rule, covered reporters 
must submit information on all NCCBR transactions in which the covered 
reporter participates. The word ``all'' should be interpreted broadly; 
the set of transactions to be included in a covered reporter's 
disclosures is wider than that used to determine whether a financial 
company is a covered reporter. Transactions should be reported 
regardless of whether the covered reporter is a cash lender or cash 
borrower, a direct participant, guarantor, or other relevant third 
party. Further, covered reporters should report transactions in this 
market segment regardless of the tenor, optionality, or the collateral 
underlying the transaction. Additionally, covered reporters should 
report transactions regardless of the domicile of the other entities 
taking part in the transaction or the location in which the transaction 
is settled. Additionally, the covered reporter should report all 
transactions that occur within the larger organization (including 
affiliates and subsidiaries of the covered reporter) to which the 
covered reporter participates. Along the same lines, Category 2 
reporters should report any transactions that occur with potential or 
actual Category 1 reporters.
III(c)(1) Line Items
    The Final Rule requires reporting on NCCBR trades, including 
detailed reporting about the securities used to collateralize these 
trades and contractual details of the underlying repurchase agreements.
    As adopted, the required data elements are listed in the table in 
section Sec.  1610.11(c) of the Final Rule's

[[Page 37102]]

text. The table is tailored to capture information regarding covered 
transactions in a manner that the Office believes largely reflects the 
data generated by covered reporters in the ordinary course of business. 
This table lists each required element and a brief description of that 
element.
    While commenters addressed the data elements in varying ways, for 
ease of reference, the following discussion follows the order of the 
data elements as they appear in the table of data elements in the NPRM. 
Additional instructions relating to data submission mechanics and the 
formatting of individual data elements will be contained in reporting 
instructions published concurrently with the Final Rule.
Cash Lender Name and Cash Borrower Name
    One commenter suggested that these elements were unnecessary 
because the Legal Entity Identifiers (LEIs) of the cash lender and cash 
borrower were to be collected and, because LEIs are unambiguous values, 
LEIs should be sufficient to identify the parties to the transaction. 
LEIs are not available in every circumstance and the Office has 
therefore determined that the cash lender and cash borrower names 
should remain as required data elements.
Guarantee
    Two commenters requested more guidance on the meaning of this 
element and the manner of reporting. Guarantees in the context of this 
element are to be understood as having the same meaning as stated above 
in section III.b ``Scope of Transactions.'' As proposed in the NPRM, 
guarantees must be reported simply with an indicator for whether the 
covered reporter issued a guarantee with respect to the transaction. 
The Office will provide further clarification on data submission 
mechanics in the reporting instructions.
Netting Set
    Two commenters asked that this field be dropped from the 
collection. As discussed below in this section under ``Risk 
Management,'' the Office is not including the netting set data element 
in the collection at this time.
Transaction ID
    One commenter asked for clarification of the word ``respondent'' in 
the data element explanation provided in the NPRM. This term means 
``covered reporter'' in this instance, and the Office has made 
corresponding changes in the Final Rule.
Trading Platform
    One commenter asked if this field would be a free-text field or if 
the Office would provide specific values for a covered reporter to 
select. It is a free-text field for the name of the trading platform 
used to perform/submit the corresponding transaction. The Office will 
provide examples in the reporting instructions.
End Date
    One commenter asked for clarification on the use of this element in 
the cases of open and evergreen repos and made a suggestion about the 
ability to distinguish between open and evergreen repos. For the 
purposes of this collection, the Office will collect the Minimum 
Maturity Date for all transactions. To preserve the granularity between 
repos with different optionality structures, the Office will provide a 
field for special instructions, notes, or comments that should be used, 
among other things, to differentiate between these different 
transaction types. Examples and clarifications will be provided in the 
reporting instructions.
Cash Lender Internal Identifier and Cash Borrower Internal Identifier
    One commenter requested clarification as to whether the cash lender 
internal identifier or cash borrower internal identifier should be 
reported when the covered reporter itself is the relevant counterparty. 
This field should always be reported, including when the covered 
reporter is the direct counterparty to the transaction. Covered 
reporters are free to develop their own internal identifiers for self-
identification.
Start Leg Amount
    One commenter suggested removing this element because some 
financial companies do not track this value on a historical basis and 
the Office would have this information previously reported by the firm 
(and associated to the same transaction identifier reported by the 
firm) as long as the firm was a covered reporter as of the inception of 
the repo. However, removing this field would mean that it would never 
be collected, even for the date the transaction was initiated. On this 
basis, the Office deems the suggestion unworkable. The element is 
retained in the collection.
Close Leg Amount
    Two commenters questioned how to calculate this value for floating-
rate repos. The Office clarifies in the Reporting Instructions that it 
does not expect this value to be calculated for floating-rate repos. 
The field should still be provided in accordance with the reporting 
instructions.
Current Cash Amount
    One commenter requested that accrued interest not be included in 
daily reporting of this element or that including accrued interest in 
this field be optional, with the addition of another field for 
reporters to indicate whether accrued interest was included. The 
commenter stated that the Office could calculate the accrued interest 
data based on the start leg amount and the spread and benchmark for the 
applicable transaction identifier. The Office understands that this 
element is not solely composed of start leg cash value and accrued 
interest and may also contain other adjustments. Moreover, the purpose 
of this field is to collect the reporter's assessment of its current 
cash amounts without having to infer these adjustments. The Office 
therefore does not see the need for a separate data element and 
declines to change the reporting of the field.
Rate
    One commenter requested confirmation that this field would be 
reportable for both fixed- and floating-rate repo transactions and, if 
so, whether a firm would report the sum of the benchmark rate and the 
spread in this field in the case of a floating-rate transaction. The 
Office will clarify this in the reporting instructions.
Floating Rate
    One commenter requested clarification as to whether this field was 
intended to identify the benchmark used for determining the rate for 
the floating-rate transaction and if so, suggested renaming the field. 
The Office confirms that the identification of the benchmark name is 
the data to be reported and has made clarifying revisions in the Final 
Rule.
Securities Identifier Type
    One commenter asked if this is a free-text field. It is not. The 
Office will enumerate the choices available for this field in the 
reporting instructions.
Securities Value at Inception
    One commenter suggested removing this element because some 
financial companies do not track this value on a historical basis and 
the Office would have this information previously reported by the firm 
(and associated to the same transaction identifier reported by the 
firm) as long as the firm was a covered reporter as of the inception of 
the repo. However, removing this field

[[Page 37103]]

would mean that it would never be collected, even for the date the 
transaction was initiated. On this basis, the Office deems the 
suggestion unworkable. The element is retained in the collection.
Haircut
    One commenter suggested removing this element because some 
financial companies do not track this value on a historical basis and 
that the Office would have this information previously reported by the 
firm (and associated with the same transaction identifier reported by 
the firm) as long as the firm was a covered reporter as of the 
inception of the repo. However, removing this field would mean that it 
would never be collected, even for the date the transaction was 
initiated. On this basis, the Office deems the suggestion unworkable. 
The element is retained in the collection.
    As noted above, some commenters addressed data element issues on a 
more thematic basis. One commenter requested clarification as to 
whether matching unique transaction identifiers (UTIs) with a 
counterparty would be necessary for reporting. It is not contemplated 
for this collection that matching elements across reporters, including 
UTIs, will be necessary.
III(c)(2) Collateral Information
    Several commenters stated that the collection of data should be 
restricted to transactions that use U.S. Treasuries as the underlying 
collateral, due to the operational complexity and burden of reporting 
trades backed by other collateral. Two of these commenters incorrectly 
asserted that the Office's interest in the proposed collection was 
driven solely by stability and liquidity in the U.S. Treasury 
securities market and that the operational build-out to cover non-U.S. 
dollar-denominated securities, U.S. agency debt, or U.S. corporate debt 
would provide questionable insight into overall systemic stability in 
U.S. or global financial markets. The collection is intended to fill a 
critical gap in regulators' information on the repo market by 
collecting data on the NCCBR market segment, in order to provide a 
comprehensive view of the last segment for which regulators do not have 
a transaction-level data source.\42\ The NPRM specifically contemplated 
collateral other than U.S. Treasuries by noting the need to better 
understand collateral risk, which has implications for financial 
stability, and that the NCCBR market segment generally contains riskier 
collateral than other segments because the cleared market segments are 
limited to Fedwire-eligible collateral.\43\
---------------------------------------------------------------------------

    \42\ 88 FR 1154, 1156.
    \43\ 88 FR 1154, 1158.
---------------------------------------------------------------------------

    As additionally noted in the NPRM, collecting data on collateral 
will provide valuable insight into financial stability matters because 
vulnerabilities associated with two of the five repo market functions-
monetization of assets and transformation of collateral-allow for the 
propagation of shocks from the repo market to the secondary market for 
the underlying collateral or for a shock in one of these securities 
markets to propagate to the repo market and then potentially spread 
into other markets.\44\ The collateral underlying a repurchase 
agreement is crucial to assessing the exposures and risk management in 
the repo market. Information about securities delivered into repo will 
allow the Office to assess common risk exposures across counterparties. 
The fields proposed will also allow the Office to assess the extent to 
which specific securities are tied to the repo market and therefore the 
potential for spillovers from the repo market into the underlying 
securities market, with potential effects on liquidity and price 
efficiency. The Office continues to believe that understanding paths of 
potential spillovers through various collateral classes is critical to 
monitoring stability in the repo market.
---------------------------------------------------------------------------

    \44\ 88 FR 1154, 1157.
---------------------------------------------------------------------------

    One commenter stated that there would be additional complexity of 
reporting trades that use other collateral on the basis that these 
trades are less standardized. While standardization is not the primary 
purpose of this collection, as noted in the NPRM, standardization in 
this decentralized market as a result of the Final Rule's reporting 
process may also improve the ability to reconcile records between 
financial companies in the event of severe market stresses.\45\
---------------------------------------------------------------------------

    \45\ 88 FR 1154, 1160.
---------------------------------------------------------------------------

    Additionally, the Office believes that the reporting thresholds 
established by the Final Rule will restrict the collection to large, 
sophisticated financial companies for which the cost of reporting 
information on all trades will be relatively minor. Further, as 
discussed below, the compliance timelines for both Category 1 and 
Category 2 covered reporters have been lengthened in the Final Rule 
compared to those proposed in the NPRM, which the Office believes will 
allow covered reporters ample time to set up and test for reporting.
    Finally, one commenter suggested a staged approach to reporting, in 
which the collection is initially limited to trades backed by U.S. 
Treasury securities and would provide the Office with a significant 
portion of the remaining segment of the repo market for which it 
currently does not have information, without imposing unduly burdensome 
reporting obligations on market participants. It also asserted that 
such an approach would prove less disruptive to the orderly operation 
of the repo market and give the Office valuable information regarding 
the compliance costs of implementing a repo reporting regime before it 
imposes additional reporting obligations. For the same reasons as noted 
above, the Office has an interest in collecting data with respect to 
all types of collateral, and in light of the anticipated sophistication 
of covered reporters and the additional time provided for a newly 
qualifying financial company to begin reporting, the Office declines to 
adopt a two-stage reporting timeline with respect to collateral type. 
For all of the reasons noted above, the Office is not limiting the 
collection of data in the Final Rule only to those transactions that 
use U.S. Treasuries as the underlying collateral.
III(c)(3) Risk Management
    In the NPRM, the Office proposed to collect information on a 
covered reporter's risk management practices. The Office sought to 
collect information on whether the covered reporter nets counterparty 
exposures across asset classes and instruments outside of repo and the 
terms on which netting occurs when the covered reporter does not net 
counterparty exposures across asset classes and instruments outside of 
repo.
    The Office received two comments on its proposal to collect data on 
netting. One commenter stated that reporting the field as proposed was 
not workable because netting is not captured on a trade-by-trade basis 
and does not represent an economic term of a trade like the other 
proposed fields. It also stated that if the Office intends to review 
netting as it relates to capital, other existing rules govern the 
collections of that information by federal financial regulators.
    The other commenter stated that given the various netting 
arrangements that could apply, reporting as proposed would require 
financial companies to make subjective and complex interpretations for 
each reported position. It also stated that netting could be based on a 
written agreement or the specific course of dealing and policies and 
procedures of each party. Finally, the commenter requested that the 
Office

[[Page 37104]]

provide additional clarity as to the specific types of netting that the 
Office intended to cover and how netting should be reported in order to 
achieve consistent reporting across covered reporters.
    The Office has concluded that while additional information on 
netting arrangements, including cross-product margining, would be 
useful for financial stability monitoring, the range of netting 
practices and documentation, along with the resultant potential 
inconsistency in reporting, suggest that other means of gathering such 
information might be more effective. Therefore, the Final Rule does not 
include this field. However, the financial stability rationale for the 
collection of information on netting arrangements and other risk 
management practices was not contested by comment letters. Such a 
collection may be addressed by the Office in the future.

III(d) Submission Process and Implementation

    In its NPRM, the Office stated that it was reviewing options for 
the submission process and implementation of the collection and, should 
the proposed rules be adopted, may require submission either through 
the Office or through a collection agent.\46\
---------------------------------------------------------------------------

    \46\ 88 FR 1154, 1167).
---------------------------------------------------------------------------

    Two commenters suggested that the Office consider using a 
collection agent, although they identified different candidates. Based 
on the Office's experience with the Ongoing Data Collection of 
Centrally Cleared Transactions in the U.S. Repurchase Agreement Market, 
the Office has determined it has the ability to efficiently manage the 
collection of data under the Final Rule. The Office has developed and 
launched a data collection utility and specifies under the Final Rule 
that covered reporters are required to submit data directly to the 
Office rather than through a collection agent. However, the Office 
reserves the option to designate a collection agent in the future.
    One commenter requested clarification as to whether, when a firm 
reports data for a particular observation date, it should report its 
positions as of the close of business on that observation date, whether 
a repo that is opened and closed on the same day is reportable, and 
whether reporting applies only to U.S. business days. The Office has 
considered this issue and made changes to the regulatory text in the 
Final Rule to include the definition of a business day. In addition to 
transactions that are opened or rolled over, the NPRM was clear that 
transactions that open and close on the same day must be reported as 
part of that business day's data submission. The Final Rule also adds a 
definition of File observation date, and this definition is consistent 
with the usage in the NPRM.
    One commenter asked whether a covered reporter's reporting 
responsibilities under the rules could be delegated to a counterparty 
or platform in order to manage reporting costs and provided an 
explanation of potential benefits of doing so. The Office distinguishes 
between trade-by-trade delegation to a counterparty or trading platform 
and delegation of its daily data submission (and any corrections 
thereto) to a provider of outsourced processing. The Office 
acknowledges that outsourcing certain business processes is an accepted 
industry practice for some financial companies, including those that 
may be covered reporters under the Final Rule. On the other hand, 
delegation that might spread the daily data submission of a covered 
reporter across several filings or from day to day among various 
entities is unworkable from an operational perspective and could create 
risks of errors in reported data. In light of these considerations, the 
Office will allow covered reporters to use a third party to submit data 
on their behalf, subject to the following constraints:
     The covered reporter may delegate a maximum of one third 
party at a time for daily file submission and corrections.
     The completed file is consistently submitted from a single 
source (either the covered reporter or the delegated third party), and 
the source may not change without advance notice to the Office.
     The covered reporter provides the Office at least 90 days 
advance notice of any proposed change to the submitter of the daily 
file.
    Adherence to the above-listed constraints will allow covered 
reporters to use third parties to meet operational needs while 
furthering data quality. In any case, the covered reporter will remain 
fully responsible for the data submission and compliance with the Final 
Rule; any issues will be addressed directly between the covered 
reporter and the Office.
    Under the NPRM, covered reporters were to submit the required data 
for each business day by 11 a.m. Eastern Time on the following business 
day. Several commenters stated that this reporting deadline should be 
extended for reasons of data quality and burden. One of these 
commenters also stated that financial companies also should have the 
ability to report between T+1 and T+3 because for some financial 
companies the positions would have matured off their system after T+1, 
and it would be difficult to determine what was outstanding three days 
before the filing deadline. Two commenters mentioned cross-border 
transactions as difficulties to T+1 reporting, with one commenter 
additionally asserting that a T+1 reporting requirement could 
discourage covered reporters from entering into NCCBR transactions, 
particularly with respect to repo transactions with non-U.S. 
counterparties.
    Taking concerns regarding burdens and data quality and availability 
into account, the Office believes that 11 a.m. Eastern Time T+1 is an 
appropriate reporting deadline. Non-U.S. trades are likely to take 
place earlier in the 24-hour cycle than U.S. transactions, because most 
non-U.S. markets close earlier in the 24-hour cycle than U.S. markets, 
so for any given day a transaction on a foreign market already has more 
time for processing. Since this deadline occurs after most 
international financial exchanges have closed for the evening, the 
Office does not believe that this reporting cadence will materially 
affect choice of venue or otherwise distort the market.
    Additionally, following the same logic out of consideration of the 
operating hours of international financial exchanges, the Final Rule 
defines ``business day'' as the period beginning at 6 p.m. Eastern Time 
on any day that the Fedwire Funds Service is open to 6 p.m. Eastern 
Time on the next day that the Fedwire Funds Service is open.\47\ For 
example, the business day of January 24, 2024, began at 6 p.m. Eastern 
Time on January 23, 2024, and ended at 6 p.m. Eastern Time on January 
24, 2024.
---------------------------------------------------------------------------

    \47\ Refer to the schedule published on the FRBservices.org 
website, currently available at https://www.frbservices.org/resources/financial-services/wires/operating-hours.html, but subject 
to change.
---------------------------------------------------------------------------

    One commenter additionally noted the need for some covered 
reporters to build reporting systems to comply with the rules and 
therefore recommended T+3 should be used. The Office rejects this 
reasoning because a T+1 system should generally be similar in 
implementation to a T+3 system. Further, another commenter noted that 
existing systems for some covered reporters would be burdened by 
waiting until T+3 to report.
    Overall, the Office has concluded that the T+1 proposal of the NPRM 
to be appropriate for both covered reporters

[[Page 37105]]

and the Office. Allowing transactions to be submitted across multiple 
days would affect the ability of the Office to manage submissions, 
resubmissions due to errors, and overall data quality. This conclusion 
is based in part on the Office's experience with the cleared repo data 
collection, which has been that even a relatively high-volume system--
one with more transactions per day than any one covered reporter under 
the Final Rule will have--works efficiently at a T+1 cadence.
    The NPRM stated that if the proposal were to be adopted, the Final 
Rule would go into effect 60 days after its publication in the Federal 
Register and that covered reporters would be required to comply with 
the Final Rule 90 days after its effective date. The Office believed 
this implementation period would provide adequate time for covered 
reporters to comply with the proposed requirements but sought public 
comment on this matter.
    Five commenters responded to the Office's questions related to the 
implementation timeline. Each requested more time to allow for building 
infrastructure and resources to meet compliance and reporting 
requirements. Several provided examples of activities that would need 
to be completed before compliance, such as changes to user interfaces, 
databases, and other existing systems, as well as implementing systems 
for processing rejections, resubmissions, and modifications and 
automating the process for generating and reporting the daily file.
    Two of these commenters stated that the Office should allow 18 
months for covered entities to begin reporting, in part due to the need 
to calculate the reporting thresholds. Both stated that the Office 
should consider a tiered or incremental approach for reporting, with 
one citing the European Securities and Markets Authority's (ESMA's) 
Securities Financing Transactions Regulation (SFTR) as an example. The 
other commenter recommended that the Office start with imposing a 
reporting obligation on Category 1 covered reporters, suggesting that 
after receiving their data for a period of time, the Office may learn 
that it has sufficient visibility into the repo market such that 
Category 2 entities would no longer need to report. Two of these 
commenters stated that the Office should allow 12 months for covered 
entities to begin reporting. Two commenters also pointed out that a 
longer implementation timeline was needed because the rules would add 
to several other global regulatory changes underway that will affect 
financial companies' reporting obligations. Several commenters tied 
their requests for additional implementation time to the date the 
Office finalizes technical specifications or reporting instructions 
that cover matters like report formats and connectivity protocols.
    One commenter asserted as another reason for an extended reporting 
implementation timeline that the Office's collection of centrally 
cleared repo transactions allowed for a longer implementation timeframe 
while covering only a single reporting entity, as opposed to the 
multiple reporting parties expected under the Office's proposed 
collection of NCCBR transactions. However, the Office's centrally 
cleared repo collection is not an analogous basis for comparison. The 
Office's earlier collection required more than 70 data elements across 
three separate data file submissions. In comparison, this collection 
requires only a single data file to be submitted with 32 data elements.
    Two commenters noted that the NPRM did not specify whether the 
Office or a collection agent would receive the data submissions. One 
asserted that once the collection agent is specified, the Office should 
issue technical details for notice and comment to maximize efficiency 
and consistency. The Office has previously engaged on these topics with 
market participants, regulators responsible for financial data 
collections, and industry associations through its NCCBR data 
collection and outreach pilot of 2022.\48\ It is with this knowledge 
that the Office's Technical Guidance, including such matters as data 
submission mechanics and formatting, have been developed and are being 
published in concert with the Final Rule at https://www.financialresearch.gov/data/non-centrally-cleared-bilateral-repo-data/. The Office does not intend to solicit additional public input on 
its Reporting Instructions nor its Technical Guidance at this time. 
These documents, along with the Final Rule, confirm that covered 
reporters will be required to submit their data directly to the Office. 
Additionally, the Technical Guidance will provide information on how to 
transmit data to the Office in the manner described in the Reporting 
Instructions.
---------------------------------------------------------------------------

    \48\ The OFR secured the voluntary participation of nine dealers 
for its pilot data collection. These dealers include primary dealers 
and nonprimary dealers, bank affiliated and nonbank affiliated 
dealers, and both purely domestic dealers and dealers that are 
affiliates of foreign institutions. Hempel, Samuel J., R. Jay Khan, 
Robert Mann, and Mark Paddrik. 2022. The OFR Blog (blog). ``OFR's 
Pilot Provides Unique Window into the Non-centrally Cleared 
Bilateral Repo Market.'' December 5, 2022. https://www.financialresearch.gov/the-ofr-blog/2022/12/05/fr-sheds-light-on-dark-corner-of-the-repo-market/.
---------------------------------------------------------------------------

    Two commenters discussed the need for testing, with one requesting 
that the Office provide details regarding testing facilities and 
processes. This commenter further recommended that one month be 
allocated for testing submissions. The Office has considered this 
comment and will accept covered reporter data as of the Final Rule's 
effective date. The Office agrees that testing is important and expects 
that most covered reporters will use the time between the effective 
date and compliance date to submit data on a test basis. The Office 
encourages all covered reporters to test submissions as early as 
possible but at least 90 days before their compliance deadline.
    The Office acknowledges that covered entities may need to establish 
or adapt their infrastructure to comply with their reporting 
obligations. However, as stated in the NPRM, the collection of these 
data is key to the Council's effective identification and monitoring of 
emerging threats to the stability of the U.S. financial system and any 
significant delay to reporting would hinder such efforts. To strike a 
balance in addressing these competing concerns, the Office is extending 
the amount of time that covered reporters have to comply with the Final 
Rule. The timeline has been extended in the Final Rule for Category 1 
covered reporters by approximately 66%, from the proposed 90 days after 
the effective date to 150 days after the effective date, and for 
Category 2 covered reporters by 200%, from the proposed 90 days after 
the effective date to 270 days after the effective date. The Office 
believes that by extending the overall implementation timeline, as well 
as establishing staggered compliance dates, with an additional 120 days 
for Category 2 covered reporters compared to Category 1 covered 
reporters, it has appropriately addressed the identified concerns. The 
effective date of the rule remains as proposed at 60 days after the 
Final Rule is published.

[[Page 37106]]



 Table 1--Timeline for Financial Companies That Meet Reporting Thresholds as of the Effective Date of the Final
                                                      Rule
----------------------------------------------------------------------------------------------------------------
                                          Publication date           Effective date          Compliance date
----------------------------------------------------------------------------------------------------------------
Category 1 covered reporter.........  T                         T+60 days..............  Effective Date + 150
                                                                                          days.
Category 2 covered reporter.........  T                         T+60 days..............  Effective Date + 270
                                                                                          days.
----------------------------------------------------------------------------------------------------------------

    One commenter requested clarification of the basis for determining 
whether financial companies meet reporting thresholds based on various 
compliance date scenarios. Consistent with the NPRM, the reporting 
threshold is met when a financial company's average daily total 
outstanding commitments to borrow cash and extend guarantees through 
NCCBR contracts over all business days during the prior calendar 
quarter is at least $10 billion.\49\
---------------------------------------------------------------------------

    \49\ 88 FR 1154, 1162.
---------------------------------------------------------------------------

    One commenter had questions about implementation time for financial 
companies that begin to meet reporting thresholds after the Final 
Rule's effective date. The NPRM stated that any financial company that 
becomes a covered reporter after the effective date of this section 
shall comply with the reporting requirements pursuant to this section 
on the first business day of the third full calendar quarter following 
the calendar quarter when such financial company becomes a covered 
reporter.\50\ In light of the revised timeline for financial companies 
that qualify as covered reporters as of the Final Rule's effective 
date, and to improve consistency and clarity, the Office is also 
revising the timeline for financial companies that become covered 
reporters after the Final Rule's effective date. For a Category 1 
company that becomes a covered reporter after the effective date, the 
compliance date has been revised to 150 days after the last day of the 
calendar quarter when the company becomes a covered reporter. For a 
Category 2 company that becomes a covered reporter after the Final 
Rule's effective date, the timeline has been revised to 270 days after 
the last day of the calendar quarter when the company becomes a covered 
reporter.
---------------------------------------------------------------------------

    \50\ 88 FR 1154, 1170.
---------------------------------------------------------------------------

    The Final Rule enumerates all compliance timelines in terms of 
days, and not quarters, to eliminate any confusion when interpreting 
the compliance timelines discussed above. Where the NPRM previously 
instructed financial companies that become covered reporters after the 
Final Rule's effective date to comply on the first business day of a 
quarter, the Final Rules will now articulate a compliance date that is 
a set number of days after the last day of the calendar quarter when 
such financial company becomes a covered reporter. The following table 
illustrates these timelines.

 Table 2--Timeline for Financial Companies That Meet Reporting Thresholds After the Effective Date of the Final
                                                      Rule
----------------------------------------------------------------------------------------------------------------
                                             Last day of threshold quarter *              Compliance date
----------------------------------------------------------------------------------------------------------------
Category 1 covered reporter..........  T                                           T+150 days.
Category 2 covered reporter..........  T                                           T+270 days.
----------------------------------------------------------------------------------------------------------------
* The threshold quarter is the calendar quarter when the financial company first exceeds the thresholds stated
  in 12 CFR 1610.11(b)(2).

    One commenter requested clarification on what happens when a 
covered reporter falls below the reporting thresholds and subsequently 
meets the thresholds again. As the NPRM stated, a covered reporter 
whose volume falls below the $10 billion threshold for at least four 
consecutive calendar quarters would have its reporting obligations 
cease.\51\ However, if that same financial company once again meets the 
reporting threshold, it is subject to the same requirements as any 
financial company that becomes a covered reporter after the Final 
Rule's effective date, as illustrated in Figure 2.
---------------------------------------------------------------------------

    \51\ 88 FR 1154, 1163.
---------------------------------------------------------------------------

    As contemplated in the NPRM, the Office is publishing concurrently 
with the Final Rule specific reporting instructions and technical 
guidance on the Office's website at https://www.financialresearch.gov/data/non-centrally-cleared-bilateral-repo-data/ regarding matters such 
as data submission mechanics and formatting. The Office may update 
these materials from time to time and will publish any updates on its 
website.

VI. Administrative Law Matters

VI(a) Paperwork Reduction Act

    The information collection contained in the Final Rule has been 
reviewed and approved by the Office of Management and Budget (``OMB'') 
under OMB Control No. 1505-0279. In accordance with the requirements of 
the Paperwork Reduction Act (the ``PRA''), the Office may not conduct 
or sponsor, and a covered reporter is not required to respond to, an 
information collection unless it displays a currently valid OMB control 
number.
    Commenters on the proposed rules generally acknowledged the need 
for the Office to collect certain information on repo transactions in 
support of the work of the Council, its member agencies, and the Office 
in connection with identifying and monitoring risks to financial 
stability.
    Commenters also requested various modifications to, or relief from, 
aspects of the proposed rules that they stated would entail burdens 
that outweighed the benefits to the Office. This included 
recommendations from expected covered reporters for a phased 
implementation process over a longer period of time than the Office had 
proposed. However, none of the commenters provided comments, empirical 
data, estimates of costs or benefits, or other analyses directly 
addressing matters pertaining to the PRA discussion.
    The Office's ability to collect non-centrally cleared repo data 
through this collection derives in part from the authority to 
promulgate regulations regarding the type and scope of financial 
transaction and position data from financial companies on a schedule 
determined by the Director of the Office

[[Page 37107]]

in consultation with the Council.\52\ In a 2022 statement on nonbank 
financial intermediation, the Council supported a recommendation made 
by the Council's Hedge Fund Working Group that the Office consider ways 
to collect NCCBR data \53\ and, in July 2022 and February 2024, the 
Office consulted with the Council on efforts to collect NCCBR data.\54\
---------------------------------------------------------------------------

    \52\ 12 U.S.C. 5344(b)(1)(B)(iii).
    \53\ Financial Stability Oversight Council. ``Statement on 
Nonbank Financial Intermediation.'' Press Release, February 4, 2022: 
FSOC. https://home.treasury.gov/news/press-releases/jy0587. 
(accessed April 17, 2024)
    \54\ Financial Stability Oversight Council. Meeting minutes. 
FSOC, July 28, 2022, p. 7. https://home.treasury.gov/system/files/256/FSOC_20220728_Minutes.pdf.
---------------------------------------------------------------------------

    The Office also has authority to promulgate regulations pursuant to 
the Office's general rulemaking authority under Dodd-Frank Act section 
153, which authorizes the Office to issue rules, regulations, and 
orders to the extent necessary to carry out certain purposes and duties 
of the Office.\55\ In particular, the purposes and duties of the Office 
include supporting the Council in fulfilling its purposes and duties, 
and supporting Council member agencies, by collecting data on behalf of 
the Council and providing such data to the Council and Council member 
agencies, and standardizing the types and formats of data reported and 
collected.\56\ The Office must consult with the Chairperson of the 
Council prior to the promulgation of any rules under section 153 \57\--
these consultations occurred both before and after the publication of 
the NPRM.
---------------------------------------------------------------------------

    \55\ 12 U.S.C. 5343(a), (c)(1).
    \56\ 12 U.S.C. 5343(a). The Council's purposes and duties 
include identifying risks to U.S. financial stability; responding to 
emerging threats to the stability of the U.S. financial system; 
monitoring the financial services marketplace in order to identify 
potential threats to U.S. financial stability; making 
recommendations in such areas that will enhance the integrity, 
efficiency, competitiveness, and stability of the U.S. financial 
markets; and identifying gaps in regulation that could pose risks to 
the financial stability of the United States. 12 U.S.C. 5322(a).
    \57\ 12 U.S.C. 5343(c)(1).
---------------------------------------------------------------------------

    As noted above, commenters generally did not provide comments, 
empirical data, or other analyses directly addressing the Office's 
estimates in the PRA discussion. As outlined in detail above, the Final 
Rule incorporates changes from the proposed rules to provide for a 
phased implementation process over a longer period of time than the 
Office had proposed. However, this change does not impact the scope of 
financial companies subject to the requirements of the Final Rule, nor 
the estimated annual burden on a covered reporter once the Final Rule 
is fully implemented.
    As a result, the Office's estimate of an annual burden of 756 hours 
per covered reporter remains unchanged. This figure is arrived at by 
estimating the daily reporting time to be approximately 3 hours for 
each submission and multiplying that figure by an average of 252 
business days in a year, the typical number of days per year that do 
not fall either on weekends or on holidays widely observed by the 
market.
    To estimate hourly wages for purposes of this Final Rule, the 
Office used data from the May 2022 Bureau of Labor Statistics 
Occupational Employment Statistics for credit intermediation and 
related activities (NAICS 522000). For hourly compensation, a figure of 
$91 per hour was used, which is an average of the 90th percentile wages 
in seven different categories of employment (compliance officers, 
accountants and auditors, lawyers, management occupations, financial 
analysts, software developers, and statisticians), plus an additional 
44.5 percent to cover subsequent wage gains and non-wage benefits, 
which yields an estimate of $131 per hour.
    In addition, and as described in the NPRM, each covered reporter 
must also obtain and maintain an LEI. Those costs have reduced since 
the publication of the NPRM, with the initial application now costing 
$50 and the annual renewal costing $40.
    Using these assumptions, the Office estimates the recurring total 
estimated annual cost to a covered reporter is $99,076.

VI(b) Regulatory Flexibility Act

    Congress enacted the Regulatory Flexibility Act (the ``RFA'') to 
address concerns related to the effects of agency rules on small 
entities.\58\ The Office is sensitive to the impact its rules may 
impose on small entities. The RFA requires agencies either to provide 
an initial regulatory flexibility analysis with a proposed rule for 
which general notice of proposed rulemaking is required, or to certify 
that the proposed rule will not have a significant economic impact on a 
substantial number of small entities.\59\ In accordance with section 
3(a) of the RFA, the Office is certifying that the Final Rule will not 
have a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \58\ 5 U.S.C. 601 et seq.
    \59\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

    As discussed above, this collection will apply to certain brokers, 
dealers, and other financial companies whose average daily outstanding 
commitments to borrow cash and extend guarantees in NCCBR with certain 
counterparties over all business days during the prior calendar quarter 
is at least $10 billion.
    Under regulations issued by the Small Business Administration, a 
``small entity'' includes those firms within the ``Finance and 
Insurance'' sector with asset sizes that vary from $15 million in 
assets up to $850 million in assets.\60\ For purposes of the RFA, 
entities that are banks are considered small entities if their assets 
are less than or equal to $850 million. The level of the activity-based 
threshold under the Final Rule ensures that any respondent will be well 
beyond these small entity definitions.
---------------------------------------------------------------------------

    \60\ 13 CFR 121.201.
---------------------------------------------------------------------------

    Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 605(b), it is 
hereby certified that this final rule will not have a significant 
economic impact on a substantial number of small entities.

VI(c) Congressional Review Act

    This rule is not a major rule pursuant to the Congressional Review 
Act (CRA), 5 U.S.C. 801 et seq.

List of Subjects in 12 CFR Part 1610

    Banks, Banking, Confidential business information, Securities.

    For the reasons stated in the preamble, the Office of Financial 
Research amends 12 CFR part 1610 as follows:

PART 1610--REGULATORY DATA COLLECTIONS

0
1. The authority citation for part 1610 continues to read as follows:

    Authority: 12 U.S.C. 5343 and 5344.



0
2. Add Sec.  1610.11 to read as follows:


Sec.  1610.11  Non-centrally Cleared Bilateral Repurchase Agreement 
Data.

    (a) Definitions. The terms used in this section have the following 
meanings:
    Business day is the period beginning at 6 p.m. Eastern Time on any 
day that the Fedwire Funds Service is open to 6 p.m. Eastern Time on 
the next day that the Fedwire Funds Service is open.
    Covered reporter means any financial company that meets the 
criteria set forth in paragraph (b)(2) of this section; provided, 
however, that any covered reporter shall cease to be a covered reporter 
only if it does not meet the dollar thresholds specified in paragraph 
(b)(2) of this section for at least four consecutive calendar quarters.
    File observation date means the date on which any business day 
ends.
    Financial company has the same meaning as in 12 U.S.C. 5341(2).

[[Page 37108]]

    Government securities broker means any financial company registered 
as a government securities broker under the Securities Exchange Act of 
1934.
    Government securities dealer means any financial company registered 
as a government securities dealer under the Securities Exchange Act of 
1934.
    Investment adviser means any financial company registered as an 
investment adviser with the Securities and Exchange Commission under 
the Investment Advisers Act of 1940.
    Non-centrally cleared bilateral repurchase agreement transaction 
means an agreement of one party to sell securities to a second party in 
exchange for the receipt of cash, and the simultaneous agreement of the 
former party to later reacquire the same securities (or any 
subsequently substituted securities) from that same second party in 
exchange for the payment of cash; or an agreement of a party to acquire 
securities from a second party in exchange for the payment of cash, and 
the simultaneous agreement of the former party to later transfer back 
the same securities (or any subsequently substituted securities) to the 
latter party in exchange for the receipt of cash. The agreement does 
not involve a tri-party custodian and is not cleared with a central 
counterparty. This definition includes, but is not limited to, 
transactions that are executed under a Master Repurchase Agreement 
(MRA) or Global Master Repurchase Agreement (GMRA), or which are agreed 
to by the parties as subject to the provisions of 11 U.S.C. 559. 
Notwithstanding the above, transactions conducted under a Securities 
Lending Agreement (SLA) or a Master Securities Lending Agreement (MSLA) 
are not considered repurchase agreements, nor are repurchase agreements 
arising from either participation in a commercial mortgage loan or the 
initial securitization of a residential mortgage loan.
    Outstanding commitment means the amount of financial obligations 
entered into pursuant to any repurchase agreement that opens on any 
business day or is outstanding as of the end of any business day, 
including transactions which both opened and closed on the same 
business day. These financial obligations include all of those that 
exist prior to netting.
    Securities broker means any financial company registered as a 
broker with the Securities and Exchange Commission under the Securities 
Exchange Act of 1934.
    Securities dealer means any financial company registered as a 
dealer with the Securities and Exchange Commission under the Securities 
Exchange Act of 1934.
    (b) Purpose and scope--(1) Purpose. The purpose of this data 
collection is to require the reporting of certain information to the 
Office about non-centrally cleared bilateral repurchase agreement 
transactions. The information will be used by the Office to fulfill its 
responsibilities under Title I of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, including support of the Council and Council 
member agencies by facilitating financial stability monitoring and 
research consistent with support of the Council and its member 
agencies.
    (2) Scope of application. Reporting under this section is required 
by any financial company that participates in a non-centrally cleared 
bilateral repurchase agreement transaction and that is:
    (i) A securities broker, securities dealer, government securities 
broker, or government securities dealer whose average daily outstanding 
commitments to borrow cash and extend guarantees in non-centrally 
cleared bilateral repurchase agreement transactions with counterparties 
over all business days during the prior calendar quarter is at least 
$10 billion, or
    (ii) Any other financial company with over $1 billion in assets or 
assets under management whose average daily outstanding commitments to 
borrow cash and extend guarantees in non-centrally cleared bilateral 
repurchase agreement transactions, including commitments of all funds 
for which the company serves as an investment adviser, with 
counterparties that are not securities brokers, securities dealers, 
government securities brokers, or government securities dealers over 
all business days during the prior calendar quarter is at least $10 
billion.
    (c) Data required. (1) Covered reporters shall report trade and 
collateral information on all non-centrally cleared bilateral 
repurchase agreement transactions, subject to paragraph (c)(2) of this 
section, in accordance with the prescribed reporting format in this 
section.
    (2) Covered reporters shall only report trade and collateral 
information with respect to any non-centrally cleared bilateral 
repurchase agreement transaction which opens on, or is outstanding at 
any time during the business day, including transactions which both 
opened and closed during the business day.
    (3) Covered reporters shall submit the following data elements for 
all transactions:

                                           Table 1 to Paragraph (c)(3)
----------------------------------------------------------------------------------------------------------------
                        Data element                                              Explanation
----------------------------------------------------------------------------------------------------------------
File observation date.......................................  The date on which the business day ends.
Covered reporter LEI........................................  The Legal Entity Identifier of the covered
                                                               reporter.
Cash lender LEI.............................................  The Legal Entity Identifier of the cash lender.
Cash lender name............................................  The legal name of the cash lender.
Cash borrower name..........................................  The legal name of the cash borrower.
Cash borrower LEI...........................................  The Legal Entity Identifier of the cash borrower.
Guarantee...................................................  Indicator for whether the covered reporter issued
                                                               a guarantee with respect to the transaction.
Transaction ID..............................................  The covered reporter-generated unique transaction
                                                               identifier in an alphanumeric string format.
Unique transaction ID.......................................  If available, the Unique Transaction Identifier
                                                               (UTI).
Trading platform............................................  For transactions arranged using an outside
                                                               vendor's platform, the provider of the platform.
Trade timestamp.............................................  The timestamp that the trade became an obligation
                                                               of the covered reporter or the covered reporter's
                                                               affiliate or subsidiary.
Start date..................................................  The start date of the repo.
End date....................................................  The date the repo matures.
Minimum maturity date.......................................  The earliest possible date on which the
                                                               transaction could end in accordance with its
                                                               contractual terms (taking into account
                                                               optionality).
Cash lender internal identifier.............................  The internal identifier assigned to the cash
                                                               lender by the covered reporter, if the covered
                                                               reporter is not the cash lender.
Cash borrower internal identifier...........................  The internal identifier assigned to the cash
                                                               borrower by the covered reporter, if the covered
                                                               reporter is not the cash borrower.

[[Page 37109]]

 
Start leg amount............................................  The amount of cash transferred to the cash
                                                               borrower on the open leg of the transaction at
                                                               the inception of the transaction.
Close leg amount............................................  The amount of cash to be transferred by the cash
                                                               borrower on the end date of the transaction.
Current cash amount.........................................  The amount of cash to be transferred by the cash
                                                               borrower, inclusive of principal, accrued
                                                               interest and other adjustments, as of the end of
                                                               the business day.
Start leg currency..........................................  The currency which is used in the Start leg amount
                                                               field.
Rate........................................................  The rate of interest paid by the cash borrower on
                                                               the transaction, expressed as an annual
                                                               percentage rate on an actual/360-day basis.
Floating rate benchmark.....................................  The name of the benchmark interest rate upon which
                                                               the transaction is based.
Floating rate reset frequency...............................  The time period, in calendar days, describing the
                                                               frequency of the floating rate resets.
Spread......................................................  The contractual spread over (or below) the
                                                               benchmark rate referenced in the repurchase
                                                               agreement.
Securities identifier type..................................  The identifier type for the securities transferred
                                                               between cash borrower and cash lender.
Security identifier.........................................  The identifier of securities transferred between
                                                               the cash borrower and the cash lender in the
                                                               repo.
Securities quantity.........................................  The number of units (e.g., shares, bonds, bills,
                                                               notes) transferred to the cash lender as of the
                                                               end of the business day.
Securities value............................................  The market value of the transferred securities as
                                                               of the end of the business day, inclusive of
                                                               accrued interest.
Securities value at inception...............................  The market value of the transferred securities at
                                                               the inception of the transaction, inclusive of
                                                               accrued interest.
Securities value currency...................................  The currency used in the Securities value and
                                                               Securities value at inception fields.
Haircut.....................................................  The difference between the market value of the
                                                               transferred securities and the purchase price
                                                               paid at the inception of the transaction.
Special instructions, notes, or comments....................  The covered reporter may characterize any detail
                                                               of the transaction with special instructions,
                                                               notes, or comments.
----------------------------------------------------------------------------------------------------------------

    (d) Reporting process. Covered reporters shall submit the required 
data for each business day by 11 a.m. Eastern Time on the following 
business day. The Office may either collect the data itself or 
designate a collection agent for that purpose.
    (e) Compliance date. (1) Any financial company that meets the 
criteria set forth in paragraph (b)(2)(i) of this section as of the 
effective date of this section shall comply with the reporting 
requirements pursuant to this section 150 days after the effective date 
of this section. Any such covered reporter's first submission shall be 
submitted on the first business day after such compliance date.
    (2) Any financial company that meets the criteria set forth in 
paragraph (b)(2)(ii) of this section as of the effective date of this 
section shall comply with the reporting requirements pursuant to this 
section 270 days after the effective date of this section. Any such 
covered reporter's first submission shall be submitted on the first 
business day after such compliance date.
    (3) Any financial company not described in subparagraph (e)(1) or 
(2) of this section that meets the criteria set forth in paragraph 
(b)(2)(i) of this section after the effective date of this section 
shall comply with the reporting requirements pursuant to this section 
150 days after the last day of the calendar quarter in which such 
financial company becomes a covered reporter.
    (4) Any financial company not described in subparagraph (e)(1) or 
(2) of this section that meets the criteria set forth in paragraph 
(b)(2)(ii) of this section after the effective date of this section 
shall comply with the reporting requirements pursuant to this section 
270 days after the last day of the calendar quarter in which such 
financial company becomes a covered reporter.

James D. Martin,
Acting Director.
[FR Doc. 2024-08999 Filed 5-3-24; 8:45 am]
BILLING CODE 4810-AK-P-P