Just as the G20 prepared to meet in Istanbul, The Depository Trust & Clearing Corporation (DTCC) released a new white paper that examines progress against the G20’s goal of derivatives transparency and calls for action on five key areas to promote a harmonized global plan to meet that goal.
The paper, “G20’s Global Derivatives Transparency Mandate,” analyzes the progress and identifies the unresolved challenges in achieving greater transparency. Looking at the policy responses from the G20 and national governments, the paper raises questions around data sharing that provides an effective global view of information for regulators and markets.
There have been important steps taken toward these goals for the global derivatives market and a regulatory framework—though currently fragmented—is being developed to meet them. There are now trade reporting regimes in place in major derivatives jurisdictions around the world and national regulators have access to more derivatives trading data than ever before. However, much action is still required to identify systemic risk on a global basis.
“The fragmentation of trade reporting means regulators lack the level of transparency necessary to monitor and mitigate systemic risk,” said Larry Thompson, DTCC Vice Chairman and General Counsel. “The discord among markets in rules and implementation timetables, as well as the absence of data-sharing agreements across jurisdictions, also forces market infrastructures into regional solutions that increase cost and complexity effectively increasing data fragmentation.”
DTCC has been at the forefront of the call for a harmonized approach to meet the G20 goals. Last fall, Michael Bodson, DTCC President and CEO, reiterated DTCC’s position during a speech at the Eurofi Forum in Italy on financial sector reforms. “As we look to the future, we urge policymakers to work collaboratively with one another and with the industry to build trust and to resolve differences in policy and approach. They must also look beyond national interests to establish globally consistent policies.”
In the paper, DTCC urges regulators around the world to develop a global plan of action with an appropriate timetable to reach agreement on the global data set required to identify systemic risk, revise existing laws preventing cross-border data sharing, agree on consistent data standards and agree a governance model enabling cross-border data sharing.
In addition to the important steps already being taken, such as the Financial Stability Board Data Gaps Project, the Prime Minister of the Republic of Turkey, Ahmet Davutoğlu, opened the Istanbul G20 Summit by saying 2015 would be “the time for deeds and the year of implementation” for financial regulation and international financial regulation.
“Core elements of the financial regulatory reform agenda are now close to completion,” Davutoğlu said in his remarks. “Building on this, we aim to finalize the new regulatory framework and ensure timely, full and consistent implementation during our Presidency.”
The white paper provides a map to guide the effort to meet the goals of the G20 and truly address the lack of transparency which nearly brought the financial system to collapse during the 2008 financial crisis.
Read the white paper: G20’s Global Derivatives Transparency Mandate