DTCC has recommended that global trade repositories in the OTC derivatives market should harmonise 30 data fields that are critical to financial stability and systemic risk analysis. The company, which operates Global Trade Repository, the industry’s largest derivatives trade reporting service spanning nine jurisdictions, made its recommendations this week to the harmonisation working group overseen by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO).
DTCC argues that following the 2009 G20 mandate on regulatory reform, trade repositories set up in different jurisdictions under regulations such as European Market Infrastructure Regulation and Dodd-Frank have implemented regulatory reporting rules for OTC transactions in different ways, sometimes using different rules and treatments for the same trades. This fragmented approach means data gathered by regulators from trade repositories can be inconsistent and of poor quality, making it difficult to observe and react to stress in the market.
DTCC’s recommendation to harmonise 30 data fields used by global trade repositories for credit derivatives reporting is the first step in wider recommendations made by the company to CPMI IOSCO for global data harmonisation. On the company’s recommendation for credit derivatives, Marisol Collazo, CEO of DTCC Data Repository, the company’s US repository, says: “The recommendation for credit derivatives is not about harmonising all the data held by a repository. The focus is on data fields that are necessary for systemic risk analysis. We are asking CPMI IOSCO to recognise the importance of these data fields and help the industry see them as critical fields so that together we can establish a data dictionary that can be used by all trade repositories.”
DTCC justifies its call to action across the industry on the basis that it operates the only global repository covering all major jurisdictions and asset classes. Its recommendations to the CPMI IOSCO harmonisation working group are in the public domain and are open to comment from industry participants. Collazo says: “We are open to comment and discussion, but harmonisation is the right and necessary thing to do.”
The company’s recommendation is in line with the International Swaps and Derivatives Association’s perspective on data quality and follows publication of a white paper by the company, G20’s Global Derivatives Transparency Mandate, which led to a review of the Global Trade Repository’s reporting fields across the nine jurisdictions it supports.
There is no timeline for harmonisation nor a regulatory mandate, and any changes to data fields will need to be resourced, but Collazo concludes: “Creating a global, consistent framework for data harmonisation and clarifying data validation across trade repositories will mean more work, but it will remove complexity and ambiguity, and deliver clean data and efficient repositories that will provide greater certainty in terms of compliance and support the G20’s goal of aggregating data to analyse systemic risk.”