DTCC proposes plan to eliminate cross-jurisdictional differences in trade reporting standards to boost transparency and the monitoring of systemic risk.
DTCC (The Depository Trust & Clearing Corporation) has published a new paper outlining a three-prong plan to achieve global data harmonisation in OTC derivatives trade reporting.
“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,” said Chris Childs, DTCC Managing Director and Head of Repository and Derivatives Services.
According to the paper, While the industry and regulators now have greater insights into local market risk, insufficient alignment of reporting requirements across jurisdictions could impede the global aggregation and analysis of OTC derivatives transaction data reported to trade repositories. This could lead to a lack of transparency across jurisdictions, which could hinder regulators’ ability to adequately monitor systemic risk.
DTCC notes that several regulatory bodies are now embarking on the adoption of CDE (critical data elements) for derivatives trade reporting as identified by the CPMI-IOSCO Harmonization Group.
The CDE initiative was designed to promote the data harmonisation critical to enabling data aggregation and systemic risk transparency. However, disparate adoption of the CDE and other reporting standards across jurisdictions will hinder the achievement of the G20’s risk mitigation objectives, and create complex implementation burdens for market participants, DTCC says.
The three-prong approach to achieve global data harmonisation in OTC derivatives trade reporting includes:
Cross-jurisdictional differences: The industry, regulators and other key stakeholders must work together to eliminate cross-jurisdictional differences in the adoption of 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 then can 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. 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, UPI and UTI, as designated by the FSB (Financial Stability Board) in October 2020.
The full paper is available here.