In September 2009, amid the fallout from the global financial crisis, the leaders of the G-20 met in Pittsburgh to hammer out a coordinated approach to regulatory reform. Chief among their concerns was the lack of transparency in OTC derivatives. The Pittsburgh statement set out four priorities – execution transparency, mandatory clearing, data storage and accessibility, and heightened capital buffers:
“All standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest. OTC derivative contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements.”
2012 has come and gone, and while much progress has been made on all four fronts, but there is plenty of work ahead. Marisol Collazo, head of DTCC’s U.S. data repository, spoke with John Lothian News editor-at-large Doug Ashburn at Sibos 2014. She offers a status update on what is happening now in the repository space across jurisdictions, where the priorities lie, and what market participants can expect over the next 12-18 months.
“Certain jurisdictions have not yet gone live with their reporting regime,” says Collazo. “Canada has gone ahead with its regulations; reporting commences in October. We are also waiting on the SEC to finalize its regulations and for reporting to occur there.”
The next step, she says, is enhancing the quality of the data so that it can be of use to global regulators. The key issue, however, is achieving cross-border harmony. “We have seen where certain jurisdictions have gone down different paths, and we have been working with the industry to see that there is as much harmonization as possible in the data fields.” One thing that has helped, according to Collazo, is developing global standards, such as Legal Entity Identifiers (LEIs). Her hope is that other standards such as product and trade identifiers continue to develop as well.
In the end, though, the regulators need to get involved and agree to which data fields are necessary for reporting, and how privacy concerns are being addressed. She says that regulators should focus on the data fields that are key to systemic risk, and aggregate that across jurisdictions. “That has to happen,” she says. “They will have misleading information if they are only looking within their jurisdiction, as they are only seeing what is transacting in their markets and not the interconnections.”