On 11 April this year, the BIS’ Committee on Payment and Settlement Systems (CPSS) in collaboration with IOSCO published a ‘consultative report’ titled ‘Authorities’ access to trade repository data’. This report recognises the problems regulators face in trying to administer a global market without a source of globally aggregated, publicly available data and makes recommendations to regulators and TRs on that basis.
Rachel Wolcott, writing for Accelus’ Compliance Complete, sets out the three main issues:
- As the report itself says, without a global source of derivatives trade data, the G20’s commitments are in danger of not being met: “With the current structure of TRs, no authority will be able to examine the entire global network of OTCD data… Absent that, the financial stability objectives of the G20 in calling for TRs might not be achieved;”
- There are many obstacles in the way of regulators gaining the level of TR data access necessary to ensure effective supervision, including procedural, legal and confidentiality constraints;
- IOSCO has said it is the role of the private sector to produce a global TR but the effects of such an initiative are clearly a public good, meaning there is little to no business case to incentivise private providers into the market.
As PJ Di Giammarino, CEO of JWG, says: “The notion of a real-time picture of global OTC derivatives trading is a bit of a mirage. Many support the concept, but it is a public good that few have a real interest in making a reality. Looking at how difficult it is to introduce a consolidated tape into just one region via MiFID 2 it’s clearly not going to materialise quickly. Today, each firm pieces together the trading landscape that is important to their own economic interests. Regulators across the globe have, in a similar way cobbled together views of the markets, but they’ve done it without consistent purpose and approach. As a result, getting this information consolidated is going to be neither cheap nor easy and the accuracy is going to be somewhat suspect for quite some time.”
“This is a whole new level of surveillance infrastructure that most regulators have neither the mandate nor capability to build. Given the technical expertise needed to put this kind of a database together along with all the issues that they list in the paper—like a lack of common reporting formats and identifiers– they’re really hoping someone else is going to do it.”
The report is open to comment until 10 May.
You can read the Accelus article here.