Feedback to The FSB on Their Data Aggregation Consultation
Some interesting responses to the idea of aggregating data into a central place from all the global trade repositories.
The FSB published a consultation paper on the 4th of February entitiled "Feasibility study on approaches to aggregate OTC derivatives data" (source here at the FSB). Now the industry has digested this idea, some choice feedback has been provided, some selected pieces below. All the feedback can be viewed on the FSB page here or using the links below.
FOA: "In the FOA’s view, it is premature to analyse how to aggregate trade repository data globally. Before global aggregation mechanisms are explored, the underlying purpose of global aggregation should be defined by the Financial Stability Board." and "For example, if the FSB’s objective is to monitor systemic risk from a global perspective, then the scope of the data required to undertake such monitoring can be adjusted accordingly."
DTCC: "DTCC strongly recommends that the FSB change the order of its review and rather than starting with technical options first begin with completing a study that identifies the analysis required to achieve the G20 systemic risk goal together with identification of the actual data required to complete this analysis."
Markit: "In this context we recommend for the FSB to consider that the valuations used for the derivative transactions in TRs are the main input factor not only into the calculation of current exposure, but also into measures of systemic risk. Regulatory authorities must therefore ensure that the valuations used are not only reliable but also unambiguous and consistent across TRs, regions, and instruments. We believe that the use of “independent” valuations, i.e. valuations that are provided by parties other than the counterparties to the transactions, will be a key element to achieve this objective."
SWIFT: "a fourth option could be considered. This model would have a common agreed data structure hosted by a network of interconnected regional physical data storage centres (for example at the EU, Americas and APAC level)."
Banking Association of South Africa: "We feel that a great deal of attention needs to be considered to different privacy laws within different jurisdictions. The FSB needs to be cognisant of the fact that a chain of data protection needs to occur in both the reporting process as well as the dissemination (to affected countries) process."
CME: "Options 1 and 2, which feature a central, supra-national aggregation mechanism, have fatal flaws. First, there is no process available for selecting a single, competitive market participant for the task of receiving data feeds from multiple local TRs and providing access to multiple different regulatory authorities. Second, the costs of creating a new, widely owned and operated aggregation mechanism for this purpose would be significant and no doubt prohibitive. Third, and most significantly of all, the fundamental reality is that there cannot be a global market-based aggregator which crosses regulatory lines in the absence of a global market regulator responsible for oversight of such body. The task of aggregating regulatory data, consuming regulatory data and providing regulatory oversight on the basis of such data is the domain of a regulator, not the market. There are no global regulators. Indeed, the Consultation Paper recognizes this fundamental fact in noting that “truly global and comprehensive data aggregation is not possible under current arrangements as no individual authority or body has comprehensive access to all data in all TRs”.
OTC Space: I wanted to respond but didn't have time, I wrote my thoughts on this topic over at FTSE Global Markets here.
- Americans for Financial Reform
- Better Markets, Inc.
- BVI (Bundesverband Investment und Asset Management e. V.)
- CME Group
- Deep River Group
- Depository Trust & Clearing Corporation (DTCC)
- Deutsches Aktieninstitut
- European Association of Corporate Treasurers
- European Banking Federation
- Financial InterGroup
- FIX Trading Community
- Futures and Options Association (FOA)
- Global Financial Markets Association (GFMA)
- Institute for Agriculture and Trade Policy
- International Swaps and Derivatives Association (ISDA)
- Japanese Bankers Association
- London Stock Exchange Group
- Stream Financial
- The Banking Association South Africa