Legal Barriers Hinder Use of Trade Reporting Data

Shanny Basar

The Financial Stability Board, the international body that monitors the global financial system, said there are still barriers to authorities’ access to trade repositories which are limiting the ability of regulators to make full use of the data.

The FSB had published a thematic peer review of over-the-counter derivative trade reporting in November 2015 which identified a number of remaining legal barriers in FSB member jurisdictions and as a result FSB members agreed to remove these barriers by June 2018.

Mark Carney, governor of the Bank of England and FSB chairman, wrote to members in March 2016 asking each FSB member jurisdiction to report by June 2016 on its planned actions to address the identified legal barriers and a second progress report was published last week. A further report will be published ahead of the G20 Leaders’ Summit in July 2017.

Hannah Meakin, partner, and Mark Chalmers, an associate, at law firm Norton Rose Fulbright, wrote in a blog today that the FSB wrote  that significant work remains across FSB member jurisdictions to remove legal barriers to reporting complete transaction information to trade repositories and to authorities’ access to data held in trade repositories.

The report said identified 13 jurisdictions where there were potential barriers, conditions or a need for further information concerning reporting to a trade repository pursuant to domestic requirements. “In their responses to the FSB Chair’s letter, one of these jurisdictions (Singapore) reported action underway to address this barrier and two jurisdictions (Korea and Mexico) reported action under consideration,” added the FSB.

In addition 16 jurisdictions had potential barriers, conditions or a need for further information concerning reporting to a trade repository pursuant to foreign requirements.

The FSB said all jurisdictions should have a legal framework to permit access by both domestic and foreign authorities to data held in a domestic trade repository, and that direct access is preferable to indirect access to enable authorities to have continuous and unintermediated access. Canada, US, China and Japan, were amongst eight  jurisdictions where access to domestic trade repository-held data by domestic authorities other than the primary authority was not permitted or was only permitted with very significant or challenging conditions, or was permitted with material conditions.

The report also recommended that authorities should coordinate in establishing cooperative arrangements that facilitate authorities’ access to TR-held data and that authorities.

“Addressing the legal barriers discussed in this report will assist not only in the reporting of comprehensive data to individual TRs and in facilitating individual authorities’ access to data, but will also be important steps towards addressing the legal and regulatory changes that would be needed to implement any future FSB decision on the potential development of a global aggregation mechanism for trade repository data that would meet the range of authorities’ data access needs,” added the report.

Market participants are already grappling with possible security and privacy issues over the requirement to include personal identifiers of dealers in transaction reporting under MiFID II, new financial regulations in Europe from 2018.

MiFID II regulations increase the number of fields that have to be reported for trades from 23 to at least 65 and for the first time, require dealers’ personal identifiers such as date of birth and the equivalent of a passport number.

Shashin Mishra, a London-based director with the solutions team at consultancy Sapient Global Markets, told Markets Media in June that the personal identifiers are causing issues as they are stored in human resources systems, not trading systems, and because of the possibility of leaks.

The UK’s vote to leave the European Union will also affect trade reporting in the region. Chris Bates, partner at law firm Clifford Chance, said at a conference in June that Brexit will affect reporting under MiFID II, which covers trading on all venues in EU, and UK firms could lose remote access to EU exchanges.

Bates said: “European regulators will not get reports from the UK so there will be a massive loss of transparency and visibility. There are no means for regulators to share this data as co-operation agreements have to be rebuilt.”

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