Marisol Collazo, DTCC Managing Director and CEO, DTCC Data Repository (U.S.) LLC (DDR)
Marisol Collazo, DTCC Managing Director and CEO, DTCC Data Repository (U.S.) LLC (DDR), sat on the SIFMA Ops 2015 panel “OTC Derivatives Reporting – Challenge to Global Transparency,” which focused on how obstacles, such as impediments to providing useful data to regulators and the lack of regulatory harmonization, have hindered the goal of bringing greater transparency to the global OTC derivatives market.
Kyle Brandon, Managing Director, Director of Research, SIFMA, moderated the panel, which included Joshua Q. Satten, Senior Vice President, Enterprise Business Architect, Northern Trust, Cynthia Meyn, Executive Vice President, Operations, PIMCO and DTCC Board Member, and Robert Schmidt, Director, Business Architecture, BMO Capital Markets.
DC: What are the key operational challenges in complying with local and regional reporting mandates?
MC: Data usability is the biggest challenge. There is still a lot of fragmentation and disharmony among jurisdictions which is impeding the ability of trade repositories to provide usable data to regulators. Each jurisdiction mandates a different set of data fields to be reported and none are harmonized. The key to providing regulators with usable data is to focus on a subset of data elements that are globally important from a systemic risk perspective and to harmonize those fields across all jurisdictions.
The industry needs to get to a state where it can provide regulators with usable data which is critical to achieving transparency - a key objective set forth by the G20. And regulators need to do their part to enable such aggregation by agreeing on a global data standard.
DC: How have these challenges delayed the goal of needed transparency in the global OTC derivatives market?
MC: Jurisdictions have made significant progress in implementing rules around reporting. Yet, the lack of harmonization among regulations has kept the industry from achieving transparency in the global OTC derivatives market.
When we began this journey to create the Global Trade Repository (GTR), we took the framework of one central database, one record that gets reported and sent to regulators. What we have today is multiple databases with varying degrees of data elements required for each jurisdiction and no clarity on global data access and what information one regulator can see reported in another jurisdiction.
However, we have seen some progress towards harmonization. For example, Canada and Australia agreed to adopt existing reporting fields. Canada recognized that most of their firms already reported their trades to the U.S. and therefore largely adopted the U.S. reporting fields. Australia is another good example where they recognize Europe’s data fields under ESMA rules.
DC: What steps is the industry taking to help achieve data harmonization in the OTC derivatives market?
MC: CPMI-IOSCO created the Global Data Harmonization Group. This group is working to address the issue of how local jurisdictions implement their rules and pull the data together. Ultimately, the group will issue guidance on what standards are needed. My hope looking forward is that this group can help bring greater alignment in data fields and validation rules. We don’t need to harmonize every single data field. However, we do need to harmonize data fields important to interconnectedness. Data fields, such as notional amounts and ID, must be harmonized to help mitigate systemic risk.
DTCC’s GTR is the only truly global trade repository supporting every scope of trade reporting asset classes and content. Our unique position allows us to look across the nine jurisdictions to help determine what the critical data fields are and we will work closely with CPMI IOSCO to provide guidance and propose the best model. We want to build greater momentum towards data harmonization.
DC: Were there other takeaways from the panel discussion?
MC: Buyside members in the audience were acutely interested in how to ease their reporting burdens. They want dealers to offer delegated service and report both sides.
Dealers need to decide if they want to take on that liability. That goes to the question of efficiency in the OTC market as dealers try to provide services to their clients. How can you ease operational burdens? Under this regulatory scheme there are other factors that do not allow dealers to easily offer reporting services. This creates a lot more cost and inefficiency around compliance requirements.