Regulators REALLY DO CARE about Trade Reporting Data Quality

Transcription

1 DerivOps North America Sample Regulators REALLY DO CARE about Trade Reporting Data Quality Lloyd Altman

2 Scope. Present the regulatory time line for the next 3 Years Explore how the Regulators are looking at Data Quality and what they are saying Analyse the key requirements from the CFTC, EMIR, and SEC Data Quality initiatives and CFTC s Data Quality recommendations Explain and demo Risk Focus Validate.Trade and [Back]Load.Trade approach to new regulations

3 Global Regulatory Requirements th Jan Hong Kong Buy side IRS/NDF. Nexus. June 2016 US SEC TR readiness Q3/ Norway ESMA Q4 2016/17 Switzerland Own Rules March 2017 ESMA RTS Rewrite Article /7 Singapore Commodity & Equity, Collateral Early 2018? MIFID II/R April 2016 REMIT L2, MMSR and South Africa. Mid Year 2016 Canada Real Time + other provinces Dec 2016 US SEC BackLoad Go live DTCC FPML 5.9 upgrade = APAC = America s = EMEA 2016/17 CFTC Data quality improvements & 120 Data point review. FSB and CPMI-IOSCO Global Harmonisation 2016/7 Hong Kong Equity plus other FX and IRS products Mid 2018 ESMA SFTR Reporting of Repos, Stock Borrow Loan Note: dates are not set in stone, schedule is subject to change based on ongoing consultations, reviews and approval processes

4 US Regulators and Data Quality CFTC DSIO Letter to the Swap Dealers Dec 2015 Identified Issues - Readily Apparent Errors, Incomplete Reporting, Duplicative Swap Reporting, Calculation Errors, Reporting Delay CFTC Guidance Data Gatekeeper Perform and automate verification process prior to reporting. Automated Review of Reported Data Seek to identify errors through automated process. Erroneous Record checks Resolve TR rejections promptly. Processes to resolve issues permanently Data Correction - Historical and new data errors should be corrected promptly Improved change management practices adequate testing of impacted reporting system

5 US Regulators and Data Quality CFTC Consultation Draft Technical Specifications for Certain Swaps Data Elements sent on 22 nd Dec, comment period closed on the 7 th March If adopted represents a significant re-working exercise for reporting firms. Focusing on descriptions, allowable values and formats Counterparty related data elements Identifying Events Separation of Price Netting of collateral A second consultation is expected Implementation is not clear but Dec 2017 is a decisive date for potential Swap Dealers Risk Focus CEO Brian Lynch Response to RFC

6 US Regulators and Data Quality Regulation SBSDR & SBSR Reg SBSDR - Deadline for registration of Swaps Data Repositories pushed from March 18 to no later than June 30, 2016 SEC Technical Specification for message formats, identifiers, and allowable values bears little resemblance to the CFTC RTS Unique Identifier Code (UIC) associated with each transaction, containing 9 fields including Branch ID and Trade ID is a brand new concept 1 ½ - sided reporting in the sense that BOTH counterparties need to report UICs to the SDR for each transaction Backloading of all pre-enactment positions that are still open and all post-enactment swaps.

7 EU Regulators and Data Quality EMIR Data Quality EMIR Level 1 EMIR Level 2 EMIR was viewed as principles based legislation Open to interpretation by the industry and TR s Low pairing rates across TR s Poor Data Quality Format of the Data. Field format defined, blank fields not allowed, UTI cannot be changed Live from the 30 th November 2014 Matching rates increased Function of the data Correct use of the action fields mandated Validation of LEI (not complete) Live from 30 th November 2015

8 EU Regulators and Data Quality EMIR RTS Rewrite Published 13 th November 2015, expected to be live from March 2017 Limited practical experience, lessons learned and consolidation of Q&A New Law approved by EC and EP 44 New Fields Collateral reporting becoming much more granular Product Classification and Product Identification Complex trades to be reported by Leg Existing fields repurposed or have had the allowable values revised or further defined Level 1 and 2 validations are now Law under the new RTS

9 What about MIFIR? MIFIR REGULATION (EU) No 600/2014 Article 26 Obligation to report transactions 7. The reports shall be made to the competent authority either by the investment firm itself, an ARM acting on its behalf or by the trading venue through whose system the transaction was completed, in accordance with paragraphs 1, 3 and 9. Investment firms shall have responsibility for the completeness, accuracy and timely submission of the reports which are submitted to the competent authority. By way of derogation from that responsibility, where an investment firm reports details of those transactions through an ARM which is acting on its behalf or a trading venue, the investment firm shall not be responsible for failures in the completeness, accuracy or timely submission of the reports which are attributable to the ARM or trading venue. In those cases and subject to Article 66(4) of Directive 2014/65/EU the ARM or trading venues shall be responsible for those failures.

10 Report-it.Trade: Control and Compliance Suite Targeted solutions delivered on a flexible service based architecture Fully Integrated Validate.Trade SLA backed, regulatory driven validation engine Multi-jurisdiction, multiasset & extensible Integrated with leading TRs Transform.Trade FpML > CSV Flattener Transform.Trade FpML <> GTR CSV Flattener FpML <> ISO20022 FpML 5.6 <> FpML 5.9 Custom mapping & adapters [Back]Load.Trade Secure file based upload to trade repositories Regulatory Backload capabilities SBSR Backload and UIC Upload versions due in Q3 Validate.Trade Pre-validate bulk files -or- Stand-alone solutions < Software available installed or as managed services > Reportable.Trade G20 Trade Reporting eligibility MiFIR Trade & Transaction Reporting eligibility Reconcile.Trade Reconcile Reportable vs. Actual Reconcile.Trade Position and Activity reconciliation Books and records vs. Regulators

11 Reg Validation Development Lifecycle TR Updates Reg tech spec RTS Updates TR Func Spec TR spec Updates BETA PRE-UAT UAT PROD Reg Analysis & rule defs Reconcile TR Vs. Reg Rules Stakeholder feedback Reconcile TR UAT Stakeholder feedback Manage GOLD Test Cases & Stakeholder Feedback

12 Validate SLA: Global Regulatory Coverage The only SLA backed data validator and TR Emulator offering fully maintained validations & customizable rules Regulatory Validation Independently maintained & community verified regulatory changes Repository Validation Repository supported* replication of venue / vendor validation requirements Validator ++ Additional value add validations and sensibility checks Customization 100% client configurable and extensible based on client needs -added bonus- Emulation Emulate GTR behavior and responses. * DTCC Leverages Validate.Trade to test internal Trade Repository changes and upgrades to meet regulations

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16 Free Trial - Validate On Demand Hosted solution Upload, validate, and inspect up to 100 messages per day Accepts FpML and CSV single-message files Log in using your LinkedIn credentials

17 FOR MORE INFORMATION Please contact Lloyd Altman Website