ISDA have issued this paper which provides comment on what they see are the issues around the various derivatives trade reporting initiatives which came into being following the declaration made at the 2009 G20 Pittsburgh Summit (and which led to rules such as Dodd-Frank, EMIR and equivalent).
The paper states that despite the fact that most G20 countries and others have or will run initiatives to collect data, the authorities are still not in a position to use that data to determine the level of systemic risk inherent in the derivatives market, which was the intent.
They put forth 5 principles that they recommend being adopted by all regulators:
1 – Harmonisation – Regulators should each ask for the same data – At present each set of rules not only asks for different data, but also asks for it differently – for example some ask for one sided reporting and some for both sides of the trade. Field definitions in each jurisdiction are also different and often unclear.
2- Use of existing standards – such as LEIs, UTIs, and also the use of FpML. They ask that any standard which exists and is designed for global use should be used by all regulators.
3 – New standards – should be created where none exists using a global and transparent process.
4 – Data sharing – across different jurisdiction should be allowed so that regulators can share information.
5 – Benchmarking – of different reporting regimes to ascertain progress.
All of these are worthy aims, although some will be difficult to achieve in practice, especially for the commodities and energy markets, where harmonisation is very hard due to the intricacies of each market, and where standards such as FpML do not cover that many markets. Never the less, if the entire trade reporting effort is to be worthwhile it has to lead to the desired transparency. Therefore any steps which move in the direction that ISDA is encouraging should surely be welcomed.