Non-Centrally Cleared Bilateral Repo
The U.S. Treasury's OFR, or Office of Financial Research published "A Closer Look at the U.S. NCCBR Market," which reviews the non-centrally cleared bilateral repurchase agreement market. They write, "The U.S. non-centrally cleared bilateral repurchase agreement (NCCBR) market has $5 trillion in outstanding repos. This market is becoming more transparent to the public due to more data collection. The data show that this market segment has a distinctive mix of collateral and tenor. Compared to the cleared and tri-party segments, NCCBR is the only segment using foreign sovereign bonds ($1.3 trillion) and is the only segment that is predominantly term ($2.7 trillion). The clearing mandate may move $1.5 trillion of NCCBR into the cleared segment, assuming no changes in participant behavior, though most NCCBR will likely remain uncleared due to the use of open term, foreign collateral and the current affiliate exemption." The brief explains, "Non-centrally cleared bilateral repos (NCCBR) are repos that are settled without the use of a clearing house or settlement agency. While these utilities have benefits, such as netting and automation, the added costs and limitations are significant enough that many repos remain fully bilateral. Bilateral settlement allows parties to flexibly negotiate a repo's terms, collateral, currency, and haircuts to fit the needs of each deal. As a result, the NCCBR market accommodates a variety of repos, such as those with private sector or foreign collateral, with special terms like optionality, or with market participants that may not have access to clearing infrastructure and thus fill many niches in the financial system." The piece adds, "The Office of Financial Research (OFR) began collecting data on NCCBR transactions in December 2024. This brief uses the data to summarize the NCCBR market by examining market concentration and mapping the bilateral exposure network to show the channels of possible risk transmission. It characterizes the distinctive features of NCCBR transactions that differentiate this market's risk profile from the cleared and tri-party alternatives. Lastly, it gives figures related to the ongoing transition of certain NCCBR to central clearing."
