The Fed proposes tracking bank Fed Funds, Eurodollar, and CD activity but leaves out repo

The Federal Reserve put out a request for comments about a proposal to collect bank activity in “Selected Money Market Rates”. The reported information is limited to Fed Funds, Eurodollar transactions, and CDs. We ask: what about repo? Why was it specifically excluded?

From the Fed document

“…The Federal Reserve proposes to implement the mandatory Report of Selected Money Market Rates (FR 2420). The FR 2420 would be a transaction-based report that collects daily liability data on federal funds, Eurodollar transactions, and certificates of deposits (CDs) from domestically chartered commercial banks and thrifts that have $26 billion or more in total assets and from U.S. branches and agencies of foreign banks with total third-party assets of $900 million or more. The FR 2420 data would be used in the analysis of current money market conditions…”

“…The FR 2420 would collect data for three liability types including federal funds, Eurodollars, and CDs, specifically with the amount of each transaction on the report date, the maturity of the transaction, and the interest rate for each transaction. In addition, as CDs may have floating rates, several additional items are being requested to better understand their interest rate structure…”

The justification for including Eurodollar transactions is that it is so easy to switch a deal back and forth between Fed Funds and Eurodollars. Cash will flow where it attracts better rates and terms. Capturing both markets will prevent losing track of the liquidity, even if just for a day.

Data would be submitted to the Fed daily by 7am the day after the trades. The Fed expects this to take 13,750 hours per year for commercial banks and thrifts, 21,656 hours for U.S. branches and agencies of foreign banks.

We wonder why repo was specifically excluded? There has been talk in Europe of a repo trade repository. In the U.S., there is decent data on tri-party and FICC repo, but doesn’t that miss bilateral trading? Trade repositories are hard to design and implement — much less actually use the data (as the CFTC found out the hard way for cleared swaps). This is big data with all the complexities. But if handled right, trade data can give clues to who is doing what. If information is granular enough and processed intelligently, it could inform as to potential systemic risk. Otherwise it will resemble the Tower of Babel. For all the talk about repo and its risk to the financial system, one would think it should be part of this sort of reporting scheme. Is repo the Rodney Dangerfield of the financial system?

A link to the Fed request is here.

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