The TRADE 59 - Q1 2019 | Page 61

[ I N T E R V I E W | C H R I S C H I L D S ] 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