A collection of 11 global financial services sector associations have agreed to support a set of principles that the International Swaps and Derivatives Association Inc. (ISDA) has developed to improve consistency in regulatory reporting for derivatives.
The ISDA principles were established to address some of the cross-border implementation issues that have emerged as derivatives reporting rules have been adopted in the wake of the global financial crisis. They call for these recommended requirements to be harmonized globally and for the policy-makers to adopt global data standards, among other things.
Although trade-reporting rules have enhanced transparency in the derivatives market, the ISDA notes, a lack of standardization and consistency in reporting requirements “has led to concerns about the quality of the data being reported.”
Specifically, poor data quality reduces the value of that data to regulators and limits their ability to oversee the markets, the ISDA says. At the same time, it adds that differences in reporting requirements increase the cost and complexity of reporting for firms that operate in multiple jurisdictions.
The 11 trade associations published a letter on Monday expressing support for the ISDA principles, which they say will result in “greater consistency in the content and format of the data being reported, further improving regulatory transparency. Market participants will also benefit from greater specificity and harmonization in their reporting across multiple regimes.”
In addition to calling for greater harmonization in the reporting requirements, the principles maintain that laws or regulations that prevent regulators from sharing data across borders should be amended or repealed.
“Regulators need to continue to work collaboratively to develop a framework that enables appropriate sharing of derivatives trade data across geographic boundaries,” the associations say. “Such a framework should contain robust confidentiality safeguards for the secure transmission and maintenance of trade data that prevent data leakage of sensitive trading information such as counterparty information. Roadblocks to the appropriate sharing of data should be removed either by regulatory or legislative action.”
And as the principles recommend that reporting progress should be benchmarked, the associations note that “the quality, completeness and consistency of data provided to repositories should be tracked, measured and shared with market participants and regulators in order to benchmark, monitor and incentivize progress in reporting.”
Similar principles will benefit global trade reporting requirements in other asset classes, the trade groups say, and lessons learned from derivatives reporting should be applied more broadly.
The groups that signed onto the letter include: the Australian Financial Market Association, the Alternative Investment Management Association, the British Bankers’ Association, the German Investment Funds Association, the European Fund and Asset Management Association, the Futures Industry Association, the Global Foreign Exchange Division of the Global Financial Markets Association, ISDA, the Managed Funds Association, the Securities Industry and Financial Markets Association and its asset-management group and the Investment Association.