Firms coming into scope on 1 October need to quickly complete onboarding and test their reporting to DTCC’s Singapore trade repository.
With the final phase of the Monetary Authority of Singapore’s (MAS) OTC derivatives trade reporting requirements right around the corner, it is imperative that firms coming into scope on 1 October 2021 assess the impact of the forthcoming regulation on their technology and processes to ensure compliance, if they have not done so already.
As set out in the Securities & Futures Act (SFA), this final chapter in MAS’ reporting regulations for OTC derivatives transactions comes after a year-long postponement that the regulator introduced as a result of the Covid-19 pandemic. Firms targeted in this phase are those on the buy-side, including asset managers.
Specifically, this phase expands the trade reporting community to include finance companies, subsidiaries of banks in Singapore, insurers and capital markets services (CMS) license holders with an annual aggregate gross notional amount of specified derivatives contracts of more than SGD 5 billion, and persons with specified derivatives contracts in an annual aggregate gross notional amount of more than SGD 8 billion to which they are a party and which are booked/traded in Singapore.
While many of these firms came into scope in 2019 for two asset classes – credit and interest rates – this final phase will also require trade reporting for foreign exchange (FX), equities and commodities derivative transactions booked and/or traded in Singapore.
In order to get ready and ensure compliance, firms must first work with their internal compliance teams to calculate the amount of exposure they have and determine whether that amount comes under scope. If so, firms must identify solutions to ensure compliance and then complete onboarding and testing.
Onboarding and Testing
To begin trade reporting, firms will need to submit their applicable derivatives contracts either directly to the DTCC Data Repository (Singapore) Pte. Ltd. (DDRS), the only MAS-approved trade repository in Singapore, or by delegated submission through a counterparty that uses DDRS trade reporting services. The onboarding process will likely take firms a business week, or longer, depending on their individual requirements and prior experience.
Running parallel to the onboarding process is testing of firms’ reporting ability through the trade repository. Firms will need to test their connectivity to DDRS and ensure web uploads for submissions and downloads of reports work optimally, among other things. Testing is fundamental to compliance, as it helps firms ensure seamless submission of transaction data to the trade repository, proper set-up of message templates, and readiness for the implementation date.
In order to leverage DDRS’ trade reporting capabilities to comply with the forthcoming reporting requirements, firms will first need to onboard to DDRS and begin testing their submissions ahead of the 1 October 2021 compliance date.
MAS’ expansion of OTC derivatives trade reporting requirements is part of a larger global move by regulators to increase transparency into the OTC derivatives markets for the identification and mitigation of systemic risk – a goal that was agreed upon during the 2009 G20 Pittsburgh Summit.
This final phase of reporting will provide greater insights and oversight capabilities of swap instruments, creating a more comprehensive view of the OTC derivatives market.
With the 1 October compliance date coming up, now is the time for firms to get ready.
This article was originally published in Regulation Asia on September 7, 2021.