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DTCC Deriv/SERV chief executive, Chris Childs, tells The TRADE about the role DTCC’s TIW played at the time of the
financial crisis, and the progress made so far in establishing a global reporting framework for OTC derivatives.
Hayley McDowell: What progress
has been made in creating a global
reporting framework for over-the-
counter (OTC) derivatives transac-
tions and what challenges remain to
be solved?
Chris Childs: There has been a huge
amount of progress in terms of
going from little transparency in
OTC derivatives markets to greater
insight into where risk lies in the
system, however further work
remains to be done in order to truly
deliver upon the G20 goals of great-
er transparency and risk mitigation.
As chairman of the Commodity
Futures Trading Commission
(CFTC), Chris Giancarlo, recently
stated, “Of the many mandates to
emerge from the financial crisis,
visibility into counterparty credit
risk of major financial institutions
was perhaps the most pressing. The
failure to accomplish it is certainly
the most disappointing.”
With regards to the problems that
remain, there has been a lack of
harmonised reporting requirements
across jurisdictions. Data elements,
and standards, in terms of what is
reported, by who and when, are very
different. This has made amal-
gamating and diving into that data
extremely challenging for regula-
tors. That said, there is currently a
huge amount of data being reported,
for example, our Global Trade
Repository, processes trades relating
to over 100,000 entities, with over
40 million positions and we process
a billion messages each month.
DTCC and others in the industry
had identified these jurisdictional
differences as early as 2012 and
began raising awareness of the need
to implement standards globally.
It is encouraging that efforts
are in play now to create and
adopt standards. For example, the
International Swaps & Derivatives
Association (ISDA) continues
to develop its Common Domain
Model (CDM) of data and process
standards for OTC derivatives,
while the Financial Stability
Board (FSB) is collaborating with
the Committee on Payments and
Market Infrastructures and board
of the International Organisation
of Securities Commissions (CP-
MI-IOSCO) to formulate gover-
nance and technical guidance to
underpin common data standards
for derivatives reporting. There is
a real need for the industry to work
together with the regulatory com-
munity to accelerate the adoption
of standards so that data can be
aggregated and shared more freely.
Furthermore, the sharing of data
held by trade repositories has not
happened to the extent originally
intended not only due to incon-
sistencies in the data collected
but also because of restrictions
around legal and structural access.
However, regulators are increas-
ingly looking at ways to share data
more efficiently and cost effec-
tively, spurred by efforts from the
FSB. For example, the US Congress
repealed statutory indemnification
requirements in December 2015
that had previously limited data
exchange with trade repositories
from third-party jurisdictions. The
CFTC subsequently proposed to
establish procedures governing
access to data collected by US swap
data repositories. In May 2017, the
European Commission proposed
an amendment to the European
Market Infrastructure Regulation
(EMIR) to provide direct access
to data held in European TRs for
third-party facilities in jurisdic-
tions with which equivalence has
been agreed.
HM: What do you think regulators
could do to simplify the process?
CC: While there may be a need
for some jurisdictions to require
additional fields for the purposes
of national market surveillance,
regulators must agree on a global
standard set of data which defines
the fundamental economics of the
trade, including who is trading,
what is being traded, the size of
the trade, the time of the trade, its
price, and so on. They need to also
agree on validation standards to
be applied so that wherever the
trade is reported, it is done so in a
standard format and those certain
data elements can be easily shared
and combined.
If regulators could agree these
data standards and a timeframe for
rolling them out globally, this would
be hugely beneficial to the industry.
"The sharing of data held by trade repositories has
not happened to the extent originally intended
not only due to inconsistencies in the data
collected but also because of restrictions around
legal and structural access."
Issue 59 // TheTradeNews.com // 61