A myriad of trade reporting requirements stemming from impending OTC derivatives regulation will pose challenges for all market participants and span all asset classes.
A panel of experts closely involved in developing and operating trade repositories for derivatives offered Sibos delegates an insight into what to expect across the various regions in a Monday afternoon session entitled, Trade repositories Tackling new regulatory requirements for OTC derivatives.
The goal of regulators is to use trade repositories to increase transparency in the derivatives market and mitigate systemic risk.
The main work on trade repositories will need to be done by the largest 20-30 derivatives dealers, but reporting will affect all types of market participants and the differences between the rules across jurisdictions needs to be looked at, said Karel Engelen, director and head of technology solutions at the International Swaps and Derivatives Association.
One major concern, noted Engelen, will be dealing with cross-border trades. For example, market participants are still unsure how to report a trade in a German interest rate swap, conducted between a Singaporean and US institution.
Moving forward
Leading the way is the Commodity Futures and Trading Commission, the US regulator that has oversight for index-based swaps, with reporting for credit derivatives and interest rate swaps launched on 12 October, with other asset classes set to follow in January. Japan, Singapore, Hong Kong and Australia are preparing their respective trade reporting rules for introduction in 2013.
A key difference between US and Europe, which is reforming swaps trading via the European market infrastructure regulation, is a requirement by the latter to report listed, as well as over-the-counter, trades.
Europe is expected to start reporting derivatives trades by 1 July 2013, and Jess Benito, managing director of REGIS-TR, a European trade repository formed through a joint venture of central securities depositories Iberclear and Clearstream, said testing of his facility would begin within two weeks.
He added REGIS-TR was looking for value-added services to further help the market prepare for the new rules.
Swaps traders, clearing houses, trade repositories and trading venues will all require a complex network of connections to each other, he said. There is room to innovate and offer new solutions that will help to ease this burden.
SWIFT and ISDA are currently collaborating on a white paper to help establish best practice for derivatives trade reporting.
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