DTCC advances plan to harmonise global derivatives reporting
16 March 2021 US
Image: Aleksandr_Simonov/adobe.stock.com
The Depository Trust & Clearing Corporation (DTCC) has outlined a three-pronged plan to further harmonise derivatives trade reporting requirements and deliver against the objectives that were originally established by the Group of 20 (G20) at its historic 2009 summit in Pittsburgh.
In a paper titled, ‘Course Correction: Finding a New Path to Global Data Harmonisation in Derivatives Trade Reporting’ DTCC outlines its recommendations for a path forward in reaching global data harmonisation in the over-the-counter (OTC) derivatives market.
The three areas of focus in the report include cross-jurisdictional differences, the transition to ISO 20022, and the enhancement of the Financial Stability Board’s (FSB) Legal Entity Identifier Regulatory Oversight Committee (LEI ROC).
Cross-jurisdictional differences: The industry, regulators and other key stakeholders must work together to eliminate cross-jurisdictional differences in the adoption of critical data elements CDE trade reporting requirements to avoid ongoing re-harmonisation efforts and future regulatory amendments.
This would involve paring down the CPMI IOSCO list of 110 CDE to only the most important elements that can then be aggregated across jurisdictions.
ISO 20022: With the help of ISO 20022 Derivatives SubSEG working group, the industry must finish the ISO 20022 CDE message scheme for OTC derivatives, setting a definitive timetable for completion, and universally adopt a single ISO 20022 message as the common data standard and format for reporting to trade repositories.
DTCC says a common messaging standard would help drive data consistency across trade repositories and jurisdictions.
LEI ROC: The industry must furnish the LEI ROC with adequate resources in order for it to successfully serve as the central governance body for CDE, universal product identifiers and universal transaction identifiers, as designated by the FSB on 1 October 2020.
“OTC derivatives trade reporting standardisation would enable regulators to reach the level of transparency and global risk monitoring identified as critical by the G20 summit, but has been a challenge to achieve for individual jurisdictions,” says Chris Childs, DTCC managing director and head of repository and derivatives services. “With several trade reporting rule sets currently under regulatory review, now is the time to work together and continue to progress against these objectives, and more specifically, to align individual jurisdiction trade reporting rules to facilitate global market transparency.”
The report also highlighted the challenges of achieving standardisation in trade reporting. Among these was that although market transparency had improved, insufficient alignment of reporting requirements across jurisdictions could impede the global aggregation and analysis of OTC derivatives transaction data reported to trade repositories.
DTCC says this could lead to a lack of transparency across jurisdictions, which could hinder regulators’ ability to adequately monitor systemic risk.
Additionally, although several regulatory bodies are now embarking on the adoption of CDE for derivatives trade reporting as identified by the Committee on Payments and Market Infrastructures and IOSCO disparate adoption across jurisdictions will hinder the achievement of the G20’s risk mitigation objectives, and create complex implementation burdens for market participants.
In a paper titled, ‘Course Correction: Finding a New Path to Global Data Harmonisation in Derivatives Trade Reporting’ DTCC outlines its recommendations for a path forward in reaching global data harmonisation in the over-the-counter (OTC) derivatives market.
The three areas of focus in the report include cross-jurisdictional differences, the transition to ISO 20022, and the enhancement of the Financial Stability Board’s (FSB) Legal Entity Identifier Regulatory Oversight Committee (LEI ROC).
Cross-jurisdictional differences: The industry, regulators and other key stakeholders must work together to eliminate cross-jurisdictional differences in the adoption of critical data elements CDE trade reporting requirements to avoid ongoing re-harmonisation efforts and future regulatory amendments.
This would involve paring down the CPMI IOSCO list of 110 CDE to only the most important elements that can then be aggregated across jurisdictions.
ISO 20022: With the help of ISO 20022 Derivatives SubSEG working group, the industry must finish the ISO 20022 CDE message scheme for OTC derivatives, setting a definitive timetable for completion, and universally adopt a single ISO 20022 message as the common data standard and format for reporting to trade repositories.
DTCC says a common messaging standard would help drive data consistency across trade repositories and jurisdictions.
LEI ROC: The industry must furnish the LEI ROC with adequate resources in order for it to successfully serve as the central governance body for CDE, universal product identifiers and universal transaction identifiers, as designated by the FSB on 1 October 2020.
“OTC derivatives trade reporting standardisation would enable regulators to reach the level of transparency and global risk monitoring identified as critical by the G20 summit, but has been a challenge to achieve for individual jurisdictions,” says Chris Childs, DTCC managing director and head of repository and derivatives services. “With several trade reporting rule sets currently under regulatory review, now is the time to work together and continue to progress against these objectives, and more specifically, to align individual jurisdiction trade reporting rules to facilitate global market transparency.”
The report also highlighted the challenges of achieving standardisation in trade reporting. Among these was that although market transparency had improved, insufficient alignment of reporting requirements across jurisdictions could impede the global aggregation and analysis of OTC derivatives transaction data reported to trade repositories.
DTCC says this could lead to a lack of transparency across jurisdictions, which could hinder regulators’ ability to adequately monitor systemic risk.
Additionally, although several regulatory bodies are now embarking on the adoption of CDE for derivatives trade reporting as identified by the Committee on Payments and Market Infrastructures and IOSCO disparate adoption across jurisdictions will hinder the achievement of the G20’s risk mitigation objectives, and create complex implementation burdens for market participants.
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