Fed Dec 2021 SCOOS survey finds 3/5th of dealers are sponsors on FICC

The December 2021 Senior Credit Officer Opinion Survey on Dealer Financing Terms

With respect to current usage of the sponsored DvP repo service, dealers reported the following:

  • About three-fifths of respondents indicated that they are currently sponsoring members in the sponsored DvP repo service.
  • Almost all current sponsoring members cited greater balance sheet efficiency and reduction in capital usage for sponsoring members as the most important factor supporting the usage of the sponsored DvP repo service. Increased financing availability or access to greater market liquidity for sponsored members was cited by more than three-fifths of respondents as the second most important factor, while reduction in operational risk for sponsoring members was cited as a contributing factor.
  • FICC margin and liquidity requirements for sponsoring members was cited by about one- half of total respondents as the most important factor limiting the usage of the sponsored DvP repo service. The administrative burden for new repo agreements and other membership obligations and operations costs associated with central clearing were commonly cited as the second and third most important factors, respectively.

Other findings:

  • One-fourth of dealers reported increased demand for funding equities. Demand for funding of other asset classes was largely unchanged (see the exhibit “Measures of Demand for Funding and Market Functioning”).
  • Approximately one-fourth of current sponsoring members reported that their institution’s sponsored DvP repo volume increased, on net, during March 2020.
  • Among the three-fourths of respondents that reported that they expect growth in sponsored GC repo trading, about one-half expected noncentrally cleared triparty activity to be the most important source of sponsored GC repo trading activity, while about one- third expected sponsored DvP activity to be the most important source. Noncentrally cleared bilateral activity was also expected to be a contributing source.

The full December 2021 SCOOS survey results are available at https://www.federalreserve.gov/data/scoos/files/scoos_202112.pdf

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