Michael C. Bodson, DTCC President and CEO
The Group of 20 (G20) called for enhancing transparency following the 2008 crisis, seeing it as crucial to the safety and stability of the financial system. Progress toward this goal is at a critical point because, as of today, a number of practical and legal barriers that limit data sharing across jurisdictions remain in place. Therefore, the cross-border identification of systemic risk, particularly related to over-the-counter derivatives, continues to be a challenge for macroprudential authorities.
This is most evident with trade repositories, which have not achieved their full potential due to the fragmented regulatory landscape that has developed along national or regional lines. Finding the balance between national regulatory interests and the need to monitor risks in a global marketplace is key. Regulators have the responsibility to protect investors and markets within their jurisdiction, but they must do so as part of a wider, global framework. Amongst all products, OTC derivatives are the most global and boundaryless in nature. Protecting a home market requires regulators to think globally in their understanding of risks.
Regardless of what is happening in each market, there are overarching issues debated in virtually every jurisdiction.
The past year we have begun to see some progress in addressing the cross-border data sharing and trade repository recognition issue that plagued the first years of derivatives reporting. Agreements and MoUs regarding access to data, recognition and adoption of data reporting fields, and exchange of data have been signed between some regulators in the Americas, Europe and the Asia/Pacific region. But there is still much more to be done regarding adoption of global standards including legal entity, product and trade identifiers as well as the quality of the data submitted to repositories.
While regulators have access to more transactional data than ever before, multiple challenges remain when it comes to transforming this information into actionable data that can assist regulators in monitoring the build-up of risk in the system. As the operator of the only true global trade repository, DTCC understands this concern and continues to engage with policymakers to support data standards globally.
Looking ahead, greater international regulatory cooperation is needed to remove significant legal barriers, such as data protection laws, blocking statutes, state secrecy laws and bank secrecy laws, that are preventing the realization of the G-20’s goals.
This article first appeared in the Eurofi Financial Forum Newsletter.