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36. Is the repo market opaque?
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This criticism has been applied at two levels: within individual institutions and across the financial system.

At first glance, the accounting treatment of repo on the balance sheet of an individual institution can appear odd, but it is entirely logical when one recalls that balance sheets are intended to measure the value and risk of a company and not the legal form in which it has structured its transactions. In a repo, the seller in a repo commits to repurchase the collateral at a fixed future repurchase price, which means that the seller retains the risk and return on that collateral. Accordingly, the collateral must remain on the balance sheet of the seller, even though he has sold legal title to the collateral to the buyer. The logic of this treatment is confirmed by the consequence that, because the cash paid for the collateral and the corresponding repayment at maturity are added to the seller’s balance sheet, this will expand, thereby signalling that that seller has increased his leverage by borrowing. In order to make it clear to the reader of a balance sheet that some assets have been sold in a repo, the International Financial Reporting Standards (IFRS) require that securities out on repo are reclassified from 'investments' to 'collateral' and are balanced by a 'collateralised borrowing' liability.

At the level of the financial system, there are gaps in the measurement of repo, although arguably no greater than for unsecured deposits or many other financial instruments (eg it is extremely difficult to fix the size of the unsecured deposit market). Of course, it is desirable for regulators and market users to have adequate data on the structure and operation of the market.

Current sources of data on the European repo market include:
  • the semi-annual European Repo Market Survey conducted by the ICMA since 2001
  • the ECB’s annual European Central Bank Euro Money Market Survey
  • the Bank of England’s sterling money market survey
  • turnover data from primary dealers collected by the Agence France Tresor
  • turnover data on electronically-traded repo from automatic repo trading systems such as BrokerTec, Eurex Repo and MTS
  • turnover data on repos cleared across CCPs published by MEFFREPO in Spain
  • considerable volumes of highly-granular transaction data reported by banks to regulators.
In the US, repo market data sources include:
  • data from primary dealers collected by the Federal Reserve Bank of New York (in the FR 2004/A/B/C Weekly Report of Dealer Positions, Transactions and Financing) and the tri-party repo systems operated by Bank of New York Mellon and JP Morgan
  • very detailed transaction data, including investments in repo, is provided by money market mutual funds to the SEC on form N-MFP
  • the Depository Trust & Clearing Corporation (DTCC), which operates the CCP for the US repo market, also publishes transaction-weighted overnight repo rate indexes for US Treasury, Agency and Agency MBS collateral (collectively called the GCF Repo Index) and the underlying turnover in that segment of the US repo market.
In addition, banks and other institutions publish accounts showing the outstanding value of their repos on reporting dates.

Regulators have expressed their intention to establish databases for repo and securities lending transactions. There may be one for each national market and, in Europe, one for the member states of the European Union. Some public authorities are proposing to collect a limited set of transaction variables that would allow them to identify concentrations of risk in collateral. Others are seeking a full trade repository to which all regulated institutions would report the entire set of details describing each transaction.

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