CFTC hints it will follow in ESMA’s footsteps

American & EU flags

In the world of derivatives reporting the Dodd-Frank Act (DFA) may be the older cousin of EMIR but if we think about which regime is more mature, EMIR takes the cake. Since the reporting go-live in 2014, EMIR has grown through several different amendments to arrive at where we stand today. Its strict validation requirements aim to provide the data quality that is necessary to measure systemic risk. The CFTC on the other side of the Atlantic has remained relatively quiet since reporting go-live at the end of 2012. That is, until now…

More complete and accurate data

The CFTC has published a White Paper which gives a view of which direction the US regulation is heading towards. No awards for guessing that they want ‘more complete, more accurate, and higher quality data’. How can this be achieved? The CFTC is proposing to elaborate on requirements of part 49 to ensure that counterparties and repositories are continuously assessing the integrity of their data and insisting that any inaccurate or missing data is corrected. This can only be achieved if the requirements are clear. In the paper, CFTC admits that part 45 data fields are not well defined and this has led to inconsistent reports which cannot be relied upon for any meaningful analysis.

The proposal is to take on board the CPMI-IOSCO harmonisation of data elements that were published in April. Amongst others, the report details that LEIs should be mandated to identify counterparties and MICs should be used to identify trading platforms. Sounds quite familiar, doesn’t it? As well as this there is an indication that collateral margin fields will be put in scope for reporting as is the case in EMIR and ASIC jurisdictions.

Relax of timeliness requirements 

Further harmonisation is suggested by the timeliness requirements being relaxed to a T+1 model. The philosophy is that if Rome wasn’t built in a day, it won’t collapse in a day either. If firms take the time to agree and confirm the terms of an OTC contract before reporting it, then the data received will be of a higher quality.

Swaps Regulation Version 2.0 won’t be a complete copy and paste of EMIR though. There is no suggestion that the regime will move to dual-sided reporting and the real-time requirements of part 43, although maybe changing as well in terms of notional capsizes, will remain a unique aspect of Dodd-Frank reporting.

No exact details or timescales are available yet however we’re pleased to remind our clients that our ReportShield™ accuracy testing service already checks the correctness of these fields under Dodd-Frank, so you can be reassured that you’re already one step ahead of the regulator. Alternatively, if you’d like some assurance that your DFA reporting is accurate, timely and complete, please don’t hesitate to contact us.