The Big Picture – Talking Derivatives Trade Reporting with DTCC’s Oliver Williams

Last month, DTCC (the Depository Trust & Clearing Corporation) announced enhancements to its GTR (Global Trade Repository) service in Singapore to support of the next phase of MAS (Monetary Authority of Singapore) derivatives trade reporting requirements. From 1 October 2018, firms will be required to report equities and commodities transactions to the MAS, in addition to the credit, interest rate and FX asset classes which already fall under the regime.

Regulation Asia sat down with Oliver Williams, Executive Director and a Regional Head of DTCC’s GTR business for Asia, to explore what the new regulations mean for financial institutions in Singapore.

Regulation Asia: Thank you for joining us. To start off, could you briefly explain what the GTR is and what it does?

Oliver Williams: The GTR is DTCC’s Global Trade Repository, a service that enables firms to report OTC derivatives transactions to regulators as required by current regulatory mandates. Today, the service provides trade reporting services in the US, Canada, Europe, Japan, Singapore, Hong Kong (agent services) and Australia, and it is the only global trade repository to provide reporting across all five derivatives asset classes.

As the largest trade repository in the world, the GTR service holds highly detailed data on OTC derivatives transactions and is considered an essential tool for managing risk, as it provides regulators with much needed transparency into this highly complex trillion-dollar market. Here in Asia, we see our globally active clients making use of the cross jurisdictional nature of our service by using existing builds so that a single message can be adapted to comply with multiple regulatory requirements. This is an essential part of our offering.

RA: Could you give us a summary of how the GTR got to where it is in Singapore and why you see this year being particularly important?

OW: So under current MAS regulations, OTC derivatives for three asset classes are currently reportable. These asset classes are interest rates, FX and credit. But the MAS is continuing to expand their trade reporting mandate, and this year we’re going to see new trade reporting requirements for the equity and commodity asset classes in Singapore, starting in October.

We’ve been working with the MAS and industry to make sure our technology is ready to support the upcoming regulatory requirements for equity and commodity derivatives. We made that announcement last month, but I think the important thing is that at the same time, we are also using this opportunity to release a re-architectured platform into Asia. With the new platform, we’re looking to bring improved usability, reduced complexity and increased transparency to users.

RA: Could you talk a little bit more about the re-architectured platform you mention and what it means?

OW: The GTR platform is something that has evolved over time alongside the trade reporting story globally. It’s not a regional product; in fact, it’s a global one. It was built initially to fulfill CFTC (Commodity Futures Trading Commission) requirements in the US, and we extended it over to Europe, then to Australia, Singapore, Hong Kong, and Japan as well. So it’s been a very intense number of years of development.

On day one, when the industry conceived of the GTR, no one knew exactly what trade reporting was going to look like. The design principles behind the GTR as we have it today are based on some of those early assumptions. But over time, as regulations have rolled out and things have become clearer, the GTR has evolved. We viewed this as an opportune time to step back and take a look at the platform and the way it works and how it might best continue to evolve.

That is the genesis for the re-architectured platform. We’ve already rolled it out in Hong Kong and Europe, and we’re now rolling it out in Singapore and Australia. We’re doing this in Singapore at the same time as we are releasing the new asset classes which become reportable in October.

RA: So, to clarify, do you mean that other asset classes that are already reportable in Singapore – interest rates, FX and credit – will be shifting to a new platform?

OW: Yes, exactly. We’re releasing the new asset classes onto the new platform as well as migrating the existing asset classes to the new platform at the same time. And this is why it makes sense for us to use this opportunity to re-architect the GTR service in Asia now, rather than doing multiple releases.

The re-architected service will be launched this month – August – and the three existing asset classes will be reported on the new platform. When the compliance date takes effect in October, the two new asset classes will go live on new platform as well. Then, the entire DTCC data repository business for Singapore which supports MAS and ASIC will be live on the new re-architectured platform.

RA: With the three existing reportable asset classes shifting to the new platform, what will be the impacts will this have to users?

OW: Just to be clear, it is not a rebranding or moving to something unrecogniseable – it’s still the GTR. Broadly speaking, we are doing a re-architecture as part of an initiative to simplify the way the GTR works today. The point of the new platform is to bring improved usability and reduce the complexity of the current platform, which ultimately will lead to a better user experience through increased transparency and access to data. We have put a lot of time and effort into the way we have engaged with the industry to make these changes as simple as we can — this does require work on behalf of our clients which is something that we recognise and do not take lightly.

The new platform will allow us to release a new portal which will, over time, offer the industry unparalleled access to the data they have reported to us as well as a host of reports and tools that will further enhance their ability to efficiently and accurately discharge their regulatory obligations.

RA: With regards to upcoming regulations or changes in existing requirements, how do you see the GTR playing a role in the MAS regulatory regime?

OW: GTR will evolve as regulation evolves. In fact, this is one of the main reasons we are re-architecting the service: to make it easier for us to make changes to the platform as mandates change.

As of now, the October mandate is the last big change for trade reporting. In the future, MAS will extend reporting obligations to additional reporting parties. So effectively what we’ll see is that the current requirements that are being adhered to by banks and merchant banks will also become relevant to what they call ‘significant derivative holders’. Effectively the next couple of changes are about which firms are impacted rather than the actual technology itself. Once significant derivatives holders become required to report, the GTR will be there to support them in their reporting requirements.

We do also see future opportunities to help the industry use the data they are collecting for OTC derivative reporting purposes for other, value-add purposes. One very real possibility is in helping reduce the amount of data that needs to be collected for other regulatory obligations. In Singapore, we see the existing MAS 610 reporting as one area that the data we are collecting could be used to reduce what firms are sending through other channels. The MAS has recently commented on this possibility as part of their consultation response to the proposed changes in MAS 610 and 1003 requirements. We are excited by this possibility and look forward to working with the MAS and the Industry to explore this further.

RA: Given that the global movement to improve transparency and reduce counterparty risks in OTC derivatives was triggered by the 2007-2008 global financial crisis, how well do you think the regulatory changes are addressing financial system risk? And what do you see as your role in this?

OW: The fact is that the regulatory regimes are behind what we see today in terms of safer, more resilient markets, as well as better-capitalised markets and firms. There is more transparency in the OTC derivatives market than there was before. That said, regulatory regimes have created complex requirements and significant resources are required by the banks to meet these requirements. And we are a big part of this puzzle.

The regulation requires reporting to a trade repository, not to a regulator. So the way we interface with firms is critically important to their ability to meet their obligations and regulatory requirements. The easier we can make things, the less burden there is on firms.

So, the question we asked is: How do we make the user experience consistent across those asset classes? And our answer was to reduce the complexity needed to meet the trade reporting requirements.

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