Over the past 18 months, the OTC derivatives world began mandatory reporting into trade repositories. Now that we have had some time to work through the logistics, it is time for a rethink. Jonathan Thursby, Global Head of CME Repository Services, says the CFTC and global regulators are looking at revisions to the rules, and he lays out his wish list for a new and improved framework.
“We started out with ‘one-size-fits-all’ for both the cleared and non-cleared markets, and there is a recognition that you need different types of reporting structures for different types of clearing structures,” says Thursby. He sees central counterparties thus taking on a larger role in the reporting process.
Thursby is satisfied with the progress being made globally on legal entity identifier (LEI) standards, but he would like to see a “corporate family tree” of affiliated entities to allow regulators to see the full spectrum of systemic risk. He also thinks the creation of a product ID system should be a top priority. “It is the main mechanism that will allow you to look horizontally across markets,” he says, adding “it is a big problem that is not getting solved and in the absence of it, it is hurting reporting quite a bit as we are not able to analyze the data.”
Thursby is most passionate, however, about the need for separate clearing structures for cleared versus non-cleared swaps. He says the rules are largely attuned to the non-cleared market, but clearing houses have the infrastructure in place to do a lot of that reporting. “To acknowledge that and revise the rules to reflect that,” he says, would lead to “a rapid improvement in the quality and timeliness of reporting.”
Finally, Thursby weighs in on the debate between dual-sided reporting versus one-sided reporting. “When you have an obligation on both sides to report, what’s really happening is one side is delegating to the other, so you are not really getting that higher quality data.” He favors a model where one side is obligated to report and the other side is obligated to check the validity of reporting.