Board of Governors of the Federal Reserve System

FR VV-1
Regulation VV Quantitative Measurements

Form:

Current (165.4 KB .PDF)

Instructions:

Current (176.8 KB .PDF)

Description:

This report collects detailed daily data from trading desks supervised by the Board of Governors of the Federal Reserve System. The data takes the form of daily time series of risk (risk limits and value at risk), performance (profit & loss and the attribution of profit & loss to risk factors), and customer-facing activity (positions and transactions) for each desk that (1) holds trading positions as defined in the Volcker Rule and (2) books trades through legal entities for which the Federal Reserve Board is the Primary Federal Regulator.

OMB Control Number:

7100-0360

Purpose:

The information is used to monitor firms' trading operations in accordance with the Volcker Rule, which prohibits proprietary trading by banks' trading desks unless the trading activity conforms to certain specified exemptions and exceptions. The FR VV-1 data are used to identify trading activity that may warrant further review given supervisors' expectations for these exemptions. Questions raised by these data may prompt further supervisory inquiries or examinations.

Background:

This report originated under the 2013 Volcker rule. The original Volcker metrics collected the risk limits, risk factor sensitivities, value at risk (VaR) & stressed value at risk, profit & loss, attribution of profit & loss to risk factors, inventory turnover, inventory aging, and customer-facing trade ratio. The data are intended to provide regulators with a view of desks' trading activities and positions in order to monitor their compliance with the Volcker Rule. In particular, they were conceived as a tool to ensure that trading desks relying on the market-making and underwriting exemptions to conduct trading activity were engaging in customer-facing activity commensurate with their risk-taking.

When the metrics' technical instructions were initially published, they were described as "interim" because the agencies intended to revisit their content and technical format at a later date. With the 2019 changes to the Rule, the agencies' supervisory experience with the Rule led them to streamline the metrics. The agencies deemed that stressed VaR was unnecessary and the usefulness of risk factor sensitivities did not justify the significant cost of reporting and interpreting them. The inventory measures were consolidated to a single level of overall inventory regardless of age, and the customer-facing trade ratio was changed to transactions. These latter two measures of customer-facing activity are now only collected for those desks whose exemptions are relevant (i.e. market-making and underwriting). The new metrics also add some categorical information which will allow supervisors to compare similar desks and connect certain data panels within desks.

The 2019 rule affords desks claiming the market-making and underwriting exemptions a presumption of compliance if their activities fall within internal risk limits, as long as the limits are set in accordance with the reasonably expected near-term demand of customers. Accordingly, the new metrics collect more information about the exemptions that the desks rely on and their internal limits. The revised metrics also add information about the agencies to which a trading desk is reported, in order to streamline supervision for those trading desks that are required to be reported to multiple agencies because they book trades through multiple legal entities.

This version of the report must be filed by firms with "significant" trading assets and liabilities beginning with the quarterly report for the first quarter of 2021, due April 30, 2020.

Respondent Panel:

This report is filed by BHCs and FBOs with average gross trading assets and liabilities over the prior four calendar quarters equal to $20 billion or more, excluding obligations issued or guaranteed by the United States or a U.S. agency. As of the 2019 publication of the rule changes, fewer than 20 firms were required to report metrics, covering 93% of U.S.-based trading activity.

Frequency:

The report is submitted quarterly, as of the last calendar day of the quarter. The data themselves are daily frequency, for every day in the covered quarter.

Public Release:

Data are held confidential by all five agencies. Because they collect detailed position and performance data at the trading desk level, they may reveal specific strategies or trade secrets, and are thus considered highly sensitive.

Additional Materials

Historical