Larry Thompson - Depository Trust and Clearing Corporation’s (DTCC) Vice Chairman and General Counsel
The Depository Trust and Clearing Corporation’s (DTCC) Vice Chairman and General Counsel Larry Thompson and other global industry leaders discussed the status of capital market data harmonization efforts at the September 2016 Eurofi Financial Forum in Bratislava.
Con Crowley, US OFR Deputy Director and Chief Data Officer, moderated the panel. Speakers included financial industry leaders from around the globe: Marc Bayle, Director General, Payments and Market Infrastructure, ECB; Costas Botopoulos, Counsel of the Governor of the Bank of Greece for European Issues, National Bank of Greece; Tajinder Singh, Deputy Secretary General, IOSCO; Emerico Zautzik, Managing Director Central Banking, Banca d’Italia; Stephen Lindsay, Head of Standards, SWIFT, and DTCC’s Thompson.
Panelists discussed the progress made to date in the collection and standardization of capital market data, a process which is essential for financial stability monitoring. Additionally, panelists looked ahead to possible solutions for pending issues related to data aggregation and sharing.
Standardization and Governance
Thompson underscored the importance of a globally consistent framework by referring to the goal of the G20 mandate: To provide transparency into opaque markets so regulators can identify and anticipate potential systemic risks. A globally consistent core set of data elements and a governance framework is necessary to facilitate global data management. He then touched on the progress the financial industry has made by providing authorities with access to more data than ever before.
“Since the G20 summit, progress has been made and trade reporting regimes are in place across all major jurisdictions. Regulators and the industry have made significant strides and authorities have access to more data than ever before,” Thompson said. “From DTCC’s perspective, a globally consistent framework for standardization and governance is needed in order to maximize the usefulness of data. The collection of data, without the ability for regulators to turn it into meaningful analytical information, falls significantly short of the G20 goals.”
Thompson maintained that ongoing coordination is essential to ensuring financial market stability. He reiterated the need for a data access and governance framework, which would allow for appropriate data sharing across jurisdictions. He commended CPMI-IOSCO and the Financial Stability Board (FSB) for spearheading ongoing international efforts to establish consistent data standards and improve access to data across jurisdictions.
Thompson also highlighted the importance of Legal Entity Identifiers (LEIs), which allow for the unique identification of legally distinct entities to financial transactions, in aggregating risk exposures, monitoring systemic risk and promoting transparency in the global financial markets.
“While the industry is adopting the LEI in its own risk management processes,” he explained, “In order for these benefits to be fully realized, regulatory mandates are needed to require all counterparties to register for LEIs, maintain reference data, and include LEIs for themselves and their counterparties in mandated regulatory reporting.”
Addressing Challenges and Next Steps
Examining some of the challenges, participants discussed current barriers to data access. For example, some data protection laws while generally well intended, unintentionally serve as barriers to reporting data and authorities’ accessing data held in trade repositories.
Thompson stressed how current barriers need to be addressed and regulators globally need to agree to a governance framework if the FSB’s June 2018 deadline to address legal barriers to reporting and accessing data is realized.
In the United States, action has been taken towards addressing these barriers. For example, Dodd-Frank’s indemnification provision, which blocked the sharing of OTC derivatives data among regulators and complicated efforts to improve market transparency and mitigate systemic risk, was repealed in late 2015.
Looking ahead, Thompson noted that ongoing international efforts to address remaining challenges are encouraging but cautioned that more work remains.
“Recent efforts are steps in the right direction but we need to remain mindful of not falling into the trap of assuming all key issues have been identified,” he said. “Increased and ongoing dialogue is critical to resolve differences that exist across jurisdictions and to help ensure consistency and coordination.