A statement entitled, "Federal Reserve Board proposes new data collection requirements related to money market instruments" says, "The Federal Reserve Board on Tuesday proposed new data collection requirements related to selected money market instruments. To assist the Federal Reserve in monitoring money market conditions, the proposal would require insured depository institutions with total assets of $26 billion or more, and U.S. branches and agencies of foreign banks with third party assets of $900 million or more, to report daily to the Federal Reserve on their federal funds transactions, Eurodollar transactions, and certificates of deposit. Comments to the Board on the proposal will be due 60 days after it is published in the Federal Register, which is expected shortly. The Federal Register notice is attached. For media inquiries, call 202-452-2955."
The "Proposed Agency Information Collection Activities; Comment Request" explains, "On June 15, 1984, the Office of Management and Budget (OMB) delegated to the Board of Governors of the Federal Reserve System (Board) its approval authority under the Paperwork Reduction Act (PRA), pursuant to 5 CFR 1320.16, to approve of and assign OMB control numbers to collection of information requests and requirements conducted or sponsored by the Board under conditions set forth in 5 CFR 1320 Appendix A.1. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information.... You may submit comments, identified by FR 2420, by any of the following methods: Agency Website: http://www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.... E-mail: regs.comments@federalreserve.gov. Include OMB number in the subject line of the message. FAX: (202) 452-3819 or (202) 452-3102.... All public comments are available from the Board's website at www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons.
The Fed explains, "The following information collection, which is being handled under this delegated authority, has received initial Board approval and is hereby published for comment. At the end of the comment period, the proposed information collection, along with an analysis of comments and recommendations received, will be submitted to the Board for final approval under OMB delegated authority. Comments are invited on the following: a. Whether the proposed collection of information is necessary for the proper performance of the Federal Reserve's functions; including whether the information has practical utility; b. The accuracy of the Federal Reserve’s estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used; c. Ways to enhance the quality, utility, and clarity of the information to be collected; d. Ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and e. Estimates of capital or start up costs and costs of operation, maintenance, and purchase of services to provide information."
The proposal's "Abstract" explains, "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."
It adds, "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 Proposal explains, "Federal Funds (Part A) - The federal funds transaction data would be the only source of high-frequency data used in the analysis of current market conditions. Data would be reported for federal funds purchased by domestic offices of reporting institutions on the reporting date. For purposes of the FR 2420, "federal funds" would be defined as all unsecured borrowings of U.S. dollars made to the institution's U.S. offices at the close of business for the report date except: Deposits, ... Debt instruments ... Repurchase agreements and security lending transactions, ... Currency and Coin, Overdrafts, Affiliate and related party transactions, Intraday transactions, and All forward starting transactions, even when the reporting date is the settlement date."
It continues, "Eurodollar Transactions (Part B) - There are many similarities between federal funds and Eurodollars, and Federal Reserve monitors and analyzes the Eurodollar market concurrent with the coverage of the federal funds market. At this time, the Federal Reserve has no source of transaction data from the Eurodollar market, so the transaction data collected in this report would be the main source of Eurodollar data for the Desk at the Federal Reserve Bank of New York (FRBNY). In addition, many firms can easily switch between these liabilities. Eurodollar data need to be collected to prevent reporting institutions from booking trades as Eurodollars instead of federal funds to avoid the reporting requirement."
The Fed proposal adds, "CDs (Part C) - Data on CD transactions would provide an alternative source of data for the current daily survey of CD rates conducted by the Federal Reserve. These data would also improve market monitoring capabilities because it would provide CD interest rate information that is not currently available. These data could also provide some optionality for creating a broad-based unsecured dollar rate: the CD rates could be combined with the daily commercial paper rates and the federal funds and Eurodollar rates in this collection.... Unlike federal funds and Eurodollars, CDs may have floating rates. For that reason, the FR 2420 would collect additional data fields for reportable CD transactions that would be necessary to understand the interest rate structure over the life of each CD."
It adds, "The combined reporter panel would capture 155 banking institutions and would be based on definitions that would cap the panel size at the point of significantly reduced marginal benefits. Using the total federal funds purchased data on the September 30, 2012, Call Report, the combined panel of 155 banking institutions is expected to capture over 80 percent of federal funds outstanding. This would create a relatively small aggregate panel, minimizing the number of institutions that would be subject to the reporting burden, yet would be expected to capture a significant portion of the targeted transaction volume."
Finally, the proposal says, "Frequency - The FR 2420 report would be submitted daily. Data collected would be used by FRBNY daily as part of the market monitoring responsibilities. Part of that analysis would be calculating average rates across products and tenors, and following trends in the aggregate levels of transactions. In order to calculate timely effective rates, daily data are needed. Time Schedule for Information Collection - The FR 2420 is a mandatory electronic report. Respondents would be required to file the FR 2420 daily with the FRBNY by 7 a.m. ET each business day for the preceding day's reportable transactions. There would be a short transition period."
