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April 12, 2013

Rearrange: Shutting Horse Door Stable After Repository Bolted Trade Access Data The

Over at the BIS website is a new paper (here) from the CPSS / IOSCO committees on how they see access to data in Trade Repositories being handled, and mainly the purposes for which they wish to use it. Their goals include:

  • Assessing Systemic Risk
  • Macro assessment by organisations such as the IMF or World Bank
  • Market surveillance, looking for market abuse and other naughty activity
  • Supervising market participants
  • Regulating, supervising or overseeing Trading Venues & FMIs
  • Planning and conducting resolution activity – in other words managing the default of a bank
  • Implementing monetary policy by observing settlement currencies
  • Research

Most or all of these are goals or functions of national regulators, so none of it is surprising, but what is noteworthy is the authors assessment of the feasibility of achieving any of them given the current scatter-gun approach to TRs & SDRs:

Page 2 section 1.2: It is likely that OTCD data will be held in multiple TRs, requiring some form of aggregation of data to get a comprehensive and accurate view of the OTC derivatives market and activity globally. With the current structure of TRs, no authority will be able to examine the entire global network of OTCD data, at a detailed level. In light of this limitation, the public sector may wish to consider and further investigate the opportunity and feasibility for a centralised or other mechanism to produce and share global aggregated data, as a complement to the direct access by the different authorities to TR held data. Outlining such an arrangement is beyond the scope of this report. Footnote 7 on the same page:

Another obstacle to the possibility of examining the global network of OTCD data is the insufficient technical standardisation of data reporting fields and formats, which renders the aggregation of data complex.  (Scott O'Malia at the CFTC has already made it very clear that the CFTC has a long way to go, to load up and make use of TR data) Page 10, Section 3.2.1.1

With the current structure of TRs, no authority will be able to examine the entire global network of OTCD data, at a detailed level. In addition, it is likely that OTCD data will be held in multiple TRs, requiring some form of aggregation of data to get a comprehensive and accurate view of the global OTC derivatives market and activities. Absent that, the financial stability objectives of the G20 in calling for TRs might not be achieved. 

I may well re-purpose my paper on the FSB plan to create a single central Trade Repository, although it was an April Fool joke, it's an entirely sensible, efficient and achievable approach to providing a global view of the capital markets.  If Facebook can support 1 billion users, why can't we create a database to store what amounts to around 10 million OTCD contracts? Comments should be sent by 10 May 2013 to both the CPSS secretariat (cpss@bis.org) and the IOSCO secretariat (accessdata@iosco.org). The comments will be published on the websites of the BIS and IOSCO unless commentators have requested otherwise. Direct PDF download here: cpss108 annotated


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