Legislation is the route to transparency, says DTCC
30 July 2015 Washington DC
Image: Shutterstock
DTCC has publicly supported legislative action to tackle obstacles that hinder the transparency goals of the G20 summit, naming a lack of coordination in global derivative reporting and data standards, and legal barriers to data sharing as significant issues.
The G20 laid out its goals on global transparency in the aftermath of the 2008 financial crisis. However, Larry Thompson, vice chairman and general counsel at DTCC, speaking at a US House of Representatives Committee on Agriculture hearing, suggested that although progress has been made, global transparency has not yet been achieved.
Thompson said that this transparency is a critical element in understanding systemic risk, and that its absence was a major contributor to the crisis.
He cited the barriers to transparency as: a lack of global communication; a regional approach to trade reporting; and significant legal barriers to global data sharing between regulators. He also expressed support for introducing legislation to enforce the correction of these issues.
According to Thompson, the global derivatives reporting that emerged after the crisis was developed on too much of a regional basis, creating an inconsistent set of requirements. This lack of coordination means trade repoitories have not met their potential as tools for monitoring systemic risk.
He also pointed out that the need for global standards for transforming the data collected by repositories, in order to create helpful information on mitigating risk and achieving a better quality of data. Common identifiers such as legal entity identifiers (LEIs) and a common reporting vocabulary could help regulators to aggregate this data and put it to good use.
However, these common standards will not be effective while cross-border data haring is restricted, Thompson said. Under the Dodd-Frank Act, swap data repositories must obtain indemnification agreements before sharing information with other regulatory authorities.
This restricts the ability of regulators to make use of the trade repositories, limiting access to data among US authorities and regulators around the world.
He said: “While market infrastructures such as DTCC stand ready to help address these challenges, the best place for this dialogue to advance is among global regulatory bodies.”
He added: “These organisations must act with increased urgency to enact global data standards and develop appropriate governance frameworks to enable cross-border access to timely, accurate data. The US, along with its partners around the world, should continue to play a leadership role in these efforts.”
The G20 laid out its goals on global transparency in the aftermath of the 2008 financial crisis. However, Larry Thompson, vice chairman and general counsel at DTCC, speaking at a US House of Representatives Committee on Agriculture hearing, suggested that although progress has been made, global transparency has not yet been achieved.
Thompson said that this transparency is a critical element in understanding systemic risk, and that its absence was a major contributor to the crisis.
He cited the barriers to transparency as: a lack of global communication; a regional approach to trade reporting; and significant legal barriers to global data sharing between regulators. He also expressed support for introducing legislation to enforce the correction of these issues.
According to Thompson, the global derivatives reporting that emerged after the crisis was developed on too much of a regional basis, creating an inconsistent set of requirements. This lack of coordination means trade repoitories have not met their potential as tools for monitoring systemic risk.
He also pointed out that the need for global standards for transforming the data collected by repositories, in order to create helpful information on mitigating risk and achieving a better quality of data. Common identifiers such as legal entity identifiers (LEIs) and a common reporting vocabulary could help regulators to aggregate this data and put it to good use.
However, these common standards will not be effective while cross-border data haring is restricted, Thompson said. Under the Dodd-Frank Act, swap data repositories must obtain indemnification agreements before sharing information with other regulatory authorities.
This restricts the ability of regulators to make use of the trade repositories, limiting access to data among US authorities and regulators around the world.
He said: “While market infrastructures such as DTCC stand ready to help address these challenges, the best place for this dialogue to advance is among global regulatory bodies.”
He added: “These organisations must act with increased urgency to enact global data standards and develop appropriate governance frameworks to enable cross-border access to timely, accurate data. The US, along with its partners around the world, should continue to play a leadership role in these efforts.”
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