About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Opinion: The Pricing & Reference Data Community – Helping You Tackle Regulatory Challenges

Subscribe to our newsletter

By Marion Leslie, Managing Director, Pricing & Reference Services, Thomson Reuters

The current barrage of regulatory reforms sweeping the global financial services industry poses an enormous challenge for all sectors. These changes are impacting banks, broker/dealers, insurance companies, institutional asset managers, hedge funds and their asset servicers such as fund administrators, custodians and prime brokers at differing levels but on a similar time frame.

Yet for all the breadth of scope and complexity of the rules being introduced, there are striking commonalities between many of them. Overall there is an inherent desire from legislatures to limit systemic risk, to make the markets more transparent and to fundamentally protect the investor (consumer) from unfair market practices. In particular, the key to compliance lies in leveraging timely, accurate and transparent pricing and reference data.

Regulatory Focus

The financial crisis has focused many regulators’ attention on protecting customers and markets, enhancing corporate governance standards and levels of transparency, and making supervision more effective. In particular, reforms are targeting:

  • Transparency and Disclosure: Various regulations – including Dodd-Frank and EMIR, IFRS, UCITS, PRIPS, AIFMD and Form PF – aim to increase transparency and disclosure of exposures to financial markets. FATCA targets transparency and disclosure of underlying investors. Meanwhile, new accounting standards being rolled out by the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) focus on measuring and reporting the ‘fair value’ of assets and liabilities.
  • Capital Adequacy and Liquidity: Basel III and Solvency II tackle systemic risk by introducing more effective capital adequacy ratios and modelling, leverage and liquidity requirements to ensure banks and insurance companies have sufficient reserves to cope with financial stresses.
  • OTC Derivatives Trading: The G20-led initiative seeks to improve trade transparency, reduce systemic default risk and promote market integrity in OTC derivative markets. The changes are being implemented in the United States through the Dodd-Frank Act, and in the European Union through EMIR and MiFID II.

Compliance Through PRD

The central theme running through this welter of regulations is the introduction of onerous new valuation, risk assessment and reporting requirements. To meet these obligations, affected institutions must address a number of common challenges. These include:

  • Providing transparency into the methodologies used to make complex calculations
  • Ability to map their risk exposures and build their own risk models
  • Understanding asset and liability positions at all times so as to maintain adequate capital and liquidity levels to offset risk exposures
  • Obtaining and managing pricing and reference data from multiple vendors
  • Maintaining a master set of data, and updating it continuously.

To achieve compliance, it is essential organisations fully understand and identify what pricing and reference data they use, how they should use it and the provenance of that content.

Non-compliance for many is simply not an option, as it presents huge reputational, legal and potentially financial risks for organisations and their associated boards. Now more than ever before firms need a reliable and trusted partner to help them meet their regulatory requirements and to deliver the pricing and reference data they need in a format tailored to their business.

Transparency

One of the most crucial capabilities firms need from their data provider is content transparency, to demonstrate where the data comes from and how it is derived.

In this environment, institutions are also seeking more than one source of price content. And for each of those sources it is important they have transparency into where the prices come from and their relevance. This is why at Thomson Reuters we provide clients with line of sight into the pricing of illiquid securities, details of the benchmarks used, as well as access to market experts who can explain how an instrument has been priced.

If you would like to learn more and to download a whitepaper on IFRS, Form PF, or Entity Risk simply click here: http://www.prdcommunity.com/index.php/special-reports

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: Market Abuse: Trends and Issues to Watch Out for in 2023

Date: 2 March 2023 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes With the FCA taking a supervisory approach to regulating firms, many regulatory interventions won’t end up in the public domain. What are they looking for and how do you ensure you stay on the right side of their supervision?...

BLOG

Alveo Integrates QuantLib into Ops360 to Deliver No Code Curve Builder Capabilities

Alveo, a provider of cloud-based market data management services, has extended its Ops360 data operations solution with the integration of QuantLib for advanced analytics. The functionality allows any appropriately permissioned business user to drag and drop input data sets into functions and set parameters to derive data and kick off the calculation of curves and...

EVENT

RegTech Summit APAC

Now in its 2nd year, the RegTech Summit APAC will bring together the regtech ecosystem to explore how capital markets in the APAC region can leverage technology to drive innovation, cut costs and support regulatory change. With more opportunities than ever before for RegTech to add value, now is the time to invest for the future. Join us to hear from leading RegTech practitioners and innovators who will share insights into how they are tackling the challenges of adopting and implementing regtech and how to advance your RegTech strategy.

GUIDE

Regulatory Data Handbook 2022/2023 – Tenth Edition

Welcome to the tenth edition of A-Team Group’s Regulatory Data Handbook, a publication that has tracked new regulations, amendments, implementation and data management requirements as regulatory change has impacted global capital markets participants over the past 10 years. This edition of the handbook includes new regulations and highlights some of the major regulatory interventions challenging...