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June 16, 2015

The Global Fix for OTC Trade Reporting

In an announcement from ISDA, a wide range of trade associations have put forward a framework of principles to guide the development of a better approach to trade reporting. In summary these are:

  • Design global standards rather than regional variations
  • Use existing open standards, such as FIX, FpML, ISO
  • Regulators and market participants should work jointly on defining standards where non exist
  • Barriers such as laws or regulations that prevent data being shared across jurisdictions should be removed
  • Like any good project, progress on trade reporting should be tracked against benchmarks and made public

The principles are supported by:

  1. the Australian Financial Market Association (AFMA),
  2. the Alternative Investment Management Association (AIMA),
  3. the British Bankers’ Association (BBA),
  4. the German Investment Funds Association (BVI),
  5. the European Fund and Asset Management Association (EFAMA),
  6. the Futures Industry Association (FIA Global),
  7. the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association (GFMA),
  8. ISDA,
  9. the Managed Funds Association (MFA),
  10. the Securities Industry and Financial Markets Association (SIFMA) and its Asset Management Group (SIFMA AMG), and
  11. The Investment Association

The full release from ISDA is here: http://www2.isda.org/news/industry-associations-endorse-isda-data-reporting-principles

The full principles document is published here: http://isda.informz.net/z/cjUucD9taT00NDIxNzM3JnA9MSZ1PTgzNzkxMTc3NCZsaT0yODAxMDg5NQ/index.html and attached below.

Perhaps if we rewound and built a single Trade Repository to rule them all, as proposed by the FSB, regulators would have a single source of clean data to draw on, to monitor global banks in a global world.


Regulatory reporting requirements for derivatives transactions should be harmonized within and across borders. Toward this end, regulators around the world should identify and agree on the trade data they need to fulfill their supervisory responsibilities, and then issue consistent reporting requirements across jurisdictions. 

 

Policy-makers should embrace and adopt the use of open standards – such as legal entity identifiers (LEIs), unique trade identifiers (UTIs), unique product identifiers (UPIs) and existing messaging standards (eg, FpML, ISO, FIX) – to drive improved quality and consistency in meeting reporting requirements. Unique global identifiers for legal entities conducting a trade (LEIs), for product types (UPIs) and for trades (UTIs/unique swap identifiers) have been developed. They should be expanded as necessary and their use should be adopted across reporting regimes. The governance of such standards should be transparent and allow for input and review by market participants, infrastructure providers and regulators. Access to the standards, licensing and cost factors should be carefully considered.

 

Where global standards do not yet exist, market participants and regulators can collaborate and secure agreement on common solutions to improve consistency and cross-border harmonization. Market participants can, in an open and transparent process, establish a central source (a data dictionary) that defines and clarifies derivatives trade and reference data and workflow requirements for each reporting field required by regulators globally. Direction and support from regulators is critical. Regulators need to  be clear and consistent  regarding their priorities and set timetables for reform, and we believe it is critical that regulators work in conjunction with the industry to pursue specific standards in the most effective and efficient manner. They should also regularly review this work and facilitate its adoption on a cross-border basis.

 

Laws or regulations that prevent policy-makers from appropriately accessing and sharing data across borders must be amended or repealed. Regulators need to continue to work collaboratively to develop a framework that enables appropriate sharing of derivatives trade data across geographic boundaries. Such a framework should contain robust confidentiality safeguards for the secure transmission and maintenance of trade data that prevent data leakage of sensitive trading information such as counterparty information. Roadblocks to the appropriate sharing of data should be removed either by regulatory or legislative action.

 

Reporting progress should be benchmarked. The quality, completeness and consistency of data provided to repositories should be tracked, measured and shared with market participants and regulators in order to benchmark, monitor and incentivize progress in reporting.

 


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