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The Ins and Outs of Collateral Re-use Accessible Data
Figure 1
This figure depicts a graphical representation of collateral inflows and outflows on a representative dealer's balance sheet. Asset positions are represented by green diamonds, SFTs are represented by blue rectangles, and unsecured liabilities are represented by yellow ovals. The figure matches assets with liabilities that use the same collateral. On the asset side of the balance sheet, there are asset positions and SFTs. Some asset positions and SFTs are encumbered while other asset positions and SFTs are unencumbered. A large share of the incoming SFTs are encumbered. On the liability side of the balance sheet, there are other funding liabilities (i.e. unsecured debt or equity), short asset positions, and SFTs. Asset positions and some SFTs are rehypothecated while some other SFTs are non-rehypothecated. A large share of outgoing collateral is rehypothecated (i.e., the collateral flows in through a short sale or an SFT).
Note: Graphical representation of collateral inflows and outflows on a representative dealer's balance sheet. Asset positions are represented by green diamonds, SFTs are represented by blue rectangles, and unsecured liabilities are yellow ovals. On the asset side, securities flow in through outright purchases and incoming SFTs. On the liability side, securities flow out through sales and outgoing SFTs. The liability side also consists of other types of nonsecured liabilities, such as unsecured debt and equity that finance a fraction of the dealer's position and incoming SFTs. The figure matches assets with liabilities that use the same collateral. A large share of the incoming SFTs are encumbered (i.e., the collateral flows out through a short sale or an SFT). A large share of outgoing collateral is rehypothecated (i.e., the collateral flows in through a short sale or an SFT).
Source: Authors' calculations.
Figure 2
This figure contains three panels. Each panel contains time series from January 2016 to September 2018. The first panel (2a), titled "Incoming and Outgoing Collateral Volumes", plots four lines showing each of the following listed in order of size: incoming collateral, outgoing collateral, encumbered incoming SFT, and rehypothecated outgoing collateral. The lines maintain their relative positions and their volumes for the entire period. Incoming collateral is the largest with volumes ranging between $3.0 trillion and $3.55 trillion. Outgoing collateral ranges between $2. 5 trillion and $3.0 trillion. Encumbered incoming SFT ranges between $2.0 trillion and $2.4 trillion. Rehypothecated outgoing collateral ranges between $1.8 trillion and 2.3 trillion. The panel shows that incoming collateral (encumbered incoming SFT) is always greater than outgoing collateral (rehypothecated outgoing collateral).
Note: Firms included are a subset of primary dealers. Internal transactions with affiliates and parent are included. Unsettled transactions are excluded. SFT is secured financing transaction.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
The second panel (2b), titled "Encumbered Products", plots five lines that are components of the encumbered incoming SFT line in the top panel. Reverse repo is the largest component, ranging between $1 trillion and $1.3 trillion, and exhibits a slightly downward trend. It is followed by securities borrowing which ranges between $400 billion and $600 billion, margin loans which ranges between $200 billion and $500 billion, and collateral swaps which ranges between $200 billion and $300 billion. Other secured loans that are not rehypothecatable are the smallest component with under $5 billion of volume.
Note: Firms included are a subset of primary dealers. Internal transactions with affiliates and parent are included. Unsettled transactions are excluded. Repo is repurchase agreement.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
The third panel (2c), titled "Rehypothecated Products", plots five lines that are components of the rehypothecated outgoing collateral line in the top panel. Repo is the largest component, ranging between $950 billion and $1.2 trillion. It is followed by customer shorts which ranges between $360 billion and $540 billion. The remaining three lines are closely clustered together: collateral swaps and firm shorts each range between $140 billion and $250 billion, and securities lending ranges between $100 billion and $200 billion.
Note: Firms included are a subset of primary dealers. Internal transactions with affiliates and parent are included. Unsettled transactions are excluded. Repo is repurchase agreement.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
Figure 3
This figure contains three panels. Each panel contains time series from January 2016 to September 2018. The first panel (3a), titled "UST Incoming and Outgoing Collateral Volumes", plots five lines showing each of the following listed in order of size: incoming collateral, outgoing collateral, encumbered incoming SFT, rehypothecated outgoing collateral, and HQLA. The lines maintain their relative positions and their volumes for the entire period. Incoming collateral is the largest with volumes ranging between $1.3 trillion and $1.6 trillion. Outgoing collateral ranges between $1.0 trillion and $1.4 trillion. Encumbered incoming SFT ranges between $1 trillion and $1.3 trillion. Rehypothecated outgoing collateral ranges between $890 billion and $1.2 trillion. HQLA ranges between $90 billion and $165 billion. The panel shows that incoming UST collateral (encumbered incoming SFT) is always greater than outgoing UST collateral (rehypothecated outgoing collateral).
Note: Firms included are a subset of primary dealers. Internal transactions with affiliates and parent are included. Unsettled transactions are excluded. SFT is secured financing transaction. HQLA is high−quality liquid assets.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
The second panel (3b), titled "UST Encumbered Products", plots four lines that are components of the encumbered incoming SFT line in the top panel. Reverse repo is the largest component, ranging between $775 billion and $1.0 trillion. It is followed by collateral swaps which ranges between $90 billion and $160 billion, securities borrowing which ranges between $50 billion and $125 billion, and margin loans which have less than $15 billion of volume.
Note: Firms included are a subset of primary dealers. Internal transactions with affiliates and parent are included. Unsettled transactions are excluded. Repo is repurchase agreement.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
The third panel (3c), titled "UST Rehypothecated Products", plots five lines that are components of the rehypothecated outgoing collateral line in the top panel. Repo is the largest component, ranging between $700 billion and $925 billion. It is followed by firm shorts which ranges between $80 billion and $150 billion, collateral swaps which ranges between $50 billion and $105 billion. Customer shorts and securities lending range between $0 and $30 billion.
Note: Firms included are a subset of primary dealers. Internal transactions with affiliates and parent are included. Unsettled transactions are excluded. Repo is repurchase agreement.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
Figure 4
This figure contains five rectangles that each represent a dealer. The first three (D1, D2, D3) are connect by curved lines, D3 and D4 are connected with a straight line, and D4 and D5 are connected with a curved line. The figure illustrates how dealers can sell a security (straight lines) or post a security through an SFT (curved lines). In the figure, D1 posts the security to D2 through an SFT, D2 posts the security to D3 through an SFT, D3 sells short the security to D4, and finally D4 posts the security to D5 through an SFT.
Note: Illustration of how, for any given moment in time, one security can be attributed to multiple financial transactions. The figure illustrates how dealers can sell a security (straight lines) or post a security through SFTs (curved lines). In the figure, D1 posts the security to D2 through an SFT, D2 posts the security to D3 through an SFT, D3 sells short the security to D4, and, finally, D4 posts the security to D5 through an SFT.
Source: Authors' calculations.
Figure 5
This figure depicts a graphical representation of collateral inflows and outflows on a representative dealer's balance sheet. Asset positions are represented by green diamonds, SFTs are represented by blue rectangles, and unsecured liabilities are represented by yellow ovals. The figure matches assets with liabilities that use the same collateral. On the asset side of the balance sheet, there are asset positions and SFTs. Some asset positions and SFTs are encumbered while other asset positions and SFTs are unencumbered. There is a small portion of SFTs that are contractually encumbered. A large share of the incoming SFTs are encumbered. On the liability side of the balance sheet, there are other funding liabilities (i.e. unsecured debt or equity) and SFTs. Asset positions and some SFTs are rehypothecated while some other SFTs are non-rehypothecated. A large share of outgoing collateral is rehypothecated (i.e., the collateral flows in through a short sale or an SFT).
Each SFT or position on the balance sheet is labeled with a letter. Liability Side: A—non-rehypothecated SFTs, B—asset positions, C—rehypothecated SFTs. Asset Side: D—asset positions, E—unencumbered SFTs, F'—contractually encumbered SFTs, F—encumbered SFTs. The labelling corresponds to the calculation of three ratios:
1. Total Collateral Pass-Through: (A+B+C)/(D+E+F+F')
2. Rehypothecated Collateral Pass-Through: (B+C)/(E+F)
3. Collateral Multiplier: (A+B+C)/A
Note: Graphical representation of collateral inflows and outflows on a representative dealer's balance sheet. Asset positions are represented by green diamonds, SFTs are represented by blue rectangles, and unsecured liabilities are yellow ovals. On the asset side, securities flow in through outright purchases and incoming SFTs. On the liability side, securities flow out through sales and outgoing SFTs. The liability side also consists of other types of nonsecured liabilities, such as unsecured debt and equity that finance a fraction of the dealer's position and incoming SFTs. The figure matches assets with liabilities that use the same collateral. A large share of the incoming SFTs are encumbered (i.e., the collateral flows out through a short sale or an SFT). A large share of outgoing collateral is rehypothecated (i.e., the collateral flows in through a short sale or an SFT).
Source: Authors' calculations.
Figure 6
This figure contains four panels. Each panel contains time series from January 2016 to September 2018. The first panel (6a), titled "Total Collateral Pass-Through", plots two lines that show the Total Collateral Pass-Through for Treasury securities and non-Treasury collateral. The y-axis ranges from .75 to 1.0. Total Collateral Pass-Through exhibits a downward trend for non-Treasury collateral and ranges between .84 and .93; for Treasury securities the range is between .79 and .88.
Note: Total Collateral Pass-Through is defined as (all outgoing collateral)/(all incoming collateral). The series above are cross−sectional averages across firms.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
The second panel (6b), titled "Rehypothecated Collateral Pass-Through", plots two lines that show the Rehypothecated Collateral Pass-Through for Treasury securities and non-Treasury collateral. The y-axis ranges from .85 to 1.0. Rehypothecated Collateral Pass-Through for non-Treasury collateral shows a high degree of variation fluctuating between .86 and .93; for Treasury securities there is a high degree of variation fluctuating between .86 and .95.
Note: Rehypothecated Collateral Pass-Through is defined as (rehy outgoing collateral)/(incoming SFT − contractually encumbered SFT). The series above are cross−sectional averages across firms.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
The third panel (6c), titled "Collateral Multiplier", plots two lines that show the Collateral Multiplier for Treasury securities and non-Treasury collateral. The y-axis ranges from 0 to 15. The Collateral Multiplier for non-Treasury collateral is stable until it declines in 2018 and ranges between 2.7 and 4.9; for Treasury securities the range is between 5.8 and 9.3. The Collateral Multiplier for Treasury securities elevates from December 2016 through January 2017.
Note: Collateral Multiplier is defined as (all outgoing collateral)/(non−rehy outgoing collateral). The series above are cross−sectional averages across firms.
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.
The fourth panel (6d), titled "UST Collateral Multiplier", plots three lines. The y-axis ranges from 0 to 20. One line shows the mean Collateral Multiplier for UST. There are two lines (one on either side of the mean UST Collateral Multiplier) that show a 95% confidence interval. The UST Collateral Multiplier ranges between 6.0 and 9.5. The upper band of the 95% confidence interval fluctuates between 7 and 14. The lower band of the 95% confidence interval fluctuates between 3.6 and 6.6.
Note: Collateral Multiplier is defined as (all outgoing collateral)/(non−rehy outgoing collateral).
Source: Federal Reserve Board, Form FR 2052a, Complex Institution Liquidity Monitoring Report.