A Monetary Authority of Singapore (MAS) consultation paper (CP) – expected around the end of the month – won’t result in delays to the October 2021 implementation date for MAS’s derivatives trade reporting requirements, practitioners heard on a recent webinar on the topic hosted by IHS Markit. As a result, practitioners should continue on their preparations for the current go-live date.
The webinar – ‘MAS OTC Derivative Reporting: Preparing for the Final Phase’ – discussed key requirements of the impending regulation and best practices for meeting them. The webinar featured speakers from IHS Markit (and its recent Cappitech acquisition), as well as from Clifford Chance: Ron Finberg, Regulatory Specialist, IHS Markit; Aaron Hallmark, Executive Director, IHS Markit; Paul Landless, Partner, Clifford Chance; and Mae Yen Teoh, Senior Associate, Clifford Chance.The new MAS derivatives reporting requirement covers OTC trades booked and traded involving Singapore-based entities conducting significant derivatives trading activity (S$8 billion+), including non-banks and corporates, with both sides of a transaction needing to report.
According to panellists on the webinar, some areas of the requirement remain to be finalised by MAS. The consultation paper is expected to clarify the requirement with respect to the use of the Unique Transaction Identifier (UTI) and Unique Product Identifier (UPI), as well as critical data elements (CDEs) needed by regulated entities to complete data fields.
Practitioners were advised to continue with their plans for meeting the October deadline; IHS Markit’s Hallmark said that company’s solution set would include any new elements introduced by the consultation process, as appropriate.
In the meantime, the panellists offered pointers on specific elements of the requirement and best practices for meeting them. Clifford Chance’s Teoh flagged as potentially challenging the necessity for firms to be able to calculate the gross amount of their in-scope derivatives trading, assess the impact of expected divergence of MAS’s benchmark reforms from the industry-standard ISDA Protocol, and proper documentation of their risk mitigation measures when dealing with investors.
IHS Markit’s Finberg identified a number of areas where a best-practices approach could improve firms’ response to the new regulation. These included operational considerations like reducing submission errors through automation of report creation and identifying differences between the MAS approach and those of other regulators, particularly in Europe and the US.
Finberg focused on best practices for preparing data ahead of the reporting process, counselling practitioners to gain a clear view of where data is originated within their firms, and whether and how it fits with the MAS report fields and formats. He suggested that firms work to integrate their trade and reference data where appropriate to ensure the correct data is applied to the correct fields, for example.
Finally, Finberg explained the MAS’s UTI methodology, particularly where it applied to multi-leg trading strategies that involved one or more segment executed out of scope. In these instances – where, say, an initial in-scope trade is augmented by a second purchase of securities by an entity outside of MAS’s scope – he suggested firms apply individual UTIs to each leg of the strategy and report accordingly.
IHS Markit’s Hallmark, meanwhile, stressed the need for firms to focus on the quality of their data. He identified two key approaches that could aid in ensuring firms comply to the fullest possible extent to the regulator’s expectations. These involved pre-submission validation – performing data checks before submitting reports to ensure fields are properly filled and formatted – and post-submission reconciliation – operational controls aimed at ensuring what’s reported matches what the firm intended to report to the trade repository.
Hallmark listed a number of challenges identified by clients as they strive to meet the new requirements. He pointed out that firms have already had to deal with multiple changes to requirements across different jurisdictions since trade reporting began in earnest in 2012, and warned of future changes coming down the pike, including planned changes by CFTC and possible additions to MAS’s derivatives reporting in future phases post-October.
Hallmark and Finberg suggested that manual processes and tactical solutions may limit firms’ ability to deal with future change, which in Singapore could include making UTI use mandatory and adding collateral calculation and reporting. They suggested that firms now have an opportunity to leverage their investment in more automated trade reporting to generate enriched data that can be used to drive AI, machine learning or predictive analytics for the benefit of the business.