DTCC: Derivatives data challenges hinder systemic risk monitoring and reduction
24 April 2018 New York
Image: Shutterstock
Although significant progress has been made during the last eight years towards establishing a global reporting framework for over-the-counter (OTC) derivatives transactions, work still needs to be done around data consistency, aggregation and access in order to be able to effectively monitor and reduce systemic risk, according to a white paper by The Depository Trust & Clearing Corporation (DTCC).
In the white paper, A Progress Report on OTC Derivatives Trade Repositories: Many Miles Travelled, More Yet to Go, DTCC called for continued focus on the definition and adoption of data standards and the exploration of opportunities to leverage new and emerging technologies.
The white paper also highlighted the collaborative work that has been undertaken across the derivatives industry to address data reporting challenges.
Challenges include data sharing as well as the development of proposed global standards, such as the CPMI-IOSCO’s work to establish guidelines for the consistent use and governance of the critical data elements needed to identify, process and report an OTC derivative transaction globally.
DTCC explained that while these efforts have helped to lay the foundation for a global reporting framework, further work remains to truly deliver upon the G20 goals of greater transparency and risk mitigation.
Val Wotton, managing director, DTCC Deriv/SERV, commented: “The industry has made significant strides in launching a global derivatives trade reporting framework following the global financial crisis, providing derivatives market transparency never before seen. However, we still have work to do to fully deliver upon G20 objectives.”
The white paper also assessed the potential for new technologies, such as distributed ledger technologies (DLT), to advance reporting practices and proposed how the industry can continue to move towards an integrated reporting framework for the global OTC derivatives market.
It explained that in order to harness DLT and other technologies to advance derivatives operations and reporting, standards must be in place to enable consistent data capture, processing and reporting.
Finally, the paper noted initiatives including the Hyperledger Project and the International Swaps and Derivatives Association’s common data model. To address such challenges, it recommended that the industry examines opportunities to expand the use of data that is captured through the global reporting framework.
Chris Childs, president and CEO, DTCC Deriv/SERV, added: “The industry must implement consistent standards globally or, alternatively, normalise data in accordance with prescribed standards. Then the industry will be able to further reduce operational risks, costs and improve the value of the data for all that need to use it.”
In the white paper, A Progress Report on OTC Derivatives Trade Repositories: Many Miles Travelled, More Yet to Go, DTCC called for continued focus on the definition and adoption of data standards and the exploration of opportunities to leverage new and emerging technologies.
The white paper also highlighted the collaborative work that has been undertaken across the derivatives industry to address data reporting challenges.
Challenges include data sharing as well as the development of proposed global standards, such as the CPMI-IOSCO’s work to establish guidelines for the consistent use and governance of the critical data elements needed to identify, process and report an OTC derivative transaction globally.
DTCC explained that while these efforts have helped to lay the foundation for a global reporting framework, further work remains to truly deliver upon the G20 goals of greater transparency and risk mitigation.
Val Wotton, managing director, DTCC Deriv/SERV, commented: “The industry has made significant strides in launching a global derivatives trade reporting framework following the global financial crisis, providing derivatives market transparency never before seen. However, we still have work to do to fully deliver upon G20 objectives.”
The white paper also assessed the potential for new technologies, such as distributed ledger technologies (DLT), to advance reporting practices and proposed how the industry can continue to move towards an integrated reporting framework for the global OTC derivatives market.
It explained that in order to harness DLT and other technologies to advance derivatives operations and reporting, standards must be in place to enable consistent data capture, processing and reporting.
Finally, the paper noted initiatives including the Hyperledger Project and the International Swaps and Derivatives Association’s common data model. To address such challenges, it recommended that the industry examines opportunities to expand the use of data that is captured through the global reporting framework.
Chris Childs, president and CEO, DTCC Deriv/SERV, added: “The industry must implement consistent standards globally or, alternatively, normalise data in accordance with prescribed standards. Then the industry will be able to further reduce operational risks, costs and improve the value of the data for all that need to use it.”
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