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A-Team Insight Blogs

IOSCO Forms Coordination Task Force for OTC Derivatives, Data Standards on the Agenda

The Technical Committee of the International Organisation of Securities Commissions (IOSCO) has formed a new Task Force on OTC Derivatives Regulation in order to coordinate securities and futures regulators’ efforts to work together in the development of supervisory and oversight structures for these markets; one aspect of which will be defining data standards for regulatory reporting. The goal of such work around standardisation of data will be to achieve some level of harmony across various regulatory jurisdictions, which could have a significant impact on the data management systems of large cross border financial institutions.

One of the purposes of the task force, according to IOSCO, will be the coordination of data reporting and aggregation requirements for OTC derivatives, thus setting the tone for how this data is to be provided to regulators. This task is in keeping with some of the initiatives and discussions that are going on at a national level with regards to achieving some level of data standardisation in order to more closely track risk within individual markets (see the US Commodity Futures Trading Commission’s (CFTC) work, for example). It will therefore no doubt include recommendations about instrument and entity identifiers and standards to this end.

“The Task Force, in consultation with the Committee on Payment and Settlement Systems (CPSS) and other appropriate regulators, will produce a report by July 2011, which sets out, both for market participants reporting to trade repositories and for trade repositories reporting to the public and to regulators for the purpose of macro- and micro-surveillance: (1) minimum data reporting requirements and standardised formats; and (2) the methodology and mechanism for the aggregation of data on a global basis. In identifying the data that should be reported, the Task Force will take into consideration the recommendations detailed in the report of the Financial Stability Board (FSB) Data Gaps and Systemic Linkages,” states IOSCO in a recent memorandum on the subject.

The FSB has been heavily focused on the data agenda this year, with a view to improving systemic risk oversight across the industry and its input to IOSCO’s endeavour will, no doubt, boost its chances of success. The task force itself is being led by the regulators of the US, UK and India: the Securities and Exchange Commission (SEC), the CFTC, the UK Financial Services Authority (FSA) and the Securities and Exchange Board of India.

As well as the July 2011 report on data, another key deliverable for the group will be a report on international standards that IOSCO says will “set out consistent international standards for OTC derivatives regulation in the areas of trading, data reporting, clearing, and the oversight of swap dealers and other market participants and, to the extent desirable and feasible, exchange and electronic trading”. This is due to be delivered by January 2012.

The standards recommendations and papers will likely feed into the discussions going on across the industry with regards to improving the data quality involved in regulatory reporting. They will also, no doubt, be used to set some of the standards for firms and regulators reporting to the US Office of Financial Research, which is due to provide its first report to the US government in 2012 also.

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