The Commodity Futures Trading Commission (CFTC) has put forward two proposals, the first to amend certain rules regarding the reporting and information regulations applicable to derivatives clearing organizations (DCOs), and the second looking at equivalence of rulers for broker-dealers.
The first of these proposed amendments would, among other things, update information requirements associated with commingling customer funds and positions in futures and swaps in the same account, address certain systems related reporting obligations regarding exceptional events, revise certain daily and event-specific reporting requirements, and include in an appendix the fields that a DCO is required to provide on a daily basis.
In addition, the Commission is proposing to amend certain delegation provisions with a proposed rule on reporting and information requirements for derivatives clearing organisations (DCOs), and a proposed order and a request for comment on an application for a capital comparability determination submitted on behalf of nonbank swap dealers subject to regulation by the Mexican Comision Nacional Bancaria y de Valores.
“This long awaited re-write attempts to frequently verify the completeness and accuracy of information around swaps data,” says Oliver Blower, CEO of VoxSmart. “This sounds great in principle but could prove much harder to achieve in practice. For instance, regulators could specifically ask to see reconstructed trades from swap deals when markets are volatile. A lot of trades on frenetic trading days could well be executed over the phone, as opposed to more transparent electronic trading venues.”
Phil Flood, regulatory expert at Gresham Technologies, said, “This rewrite is a clear marker that the journey towards the holy grail the industry needs for global harmonisation of regulatory reporting is underway. The regulators are now focusing on data quality, validations, and reconciliation to improve accuracy of submissions and looking at best practices from other regimes and jurisdictions.”
Blower continues, “This type of scenario presents a real challenge to banks who, more often than not, have their trade and communication data residing in two entirely separate buckets. The manual process of sifting through these disparate data sets and connecting the dots between trades, particularly during periods of heightened volatility, is a major headache. To meet the spirit of this CFTC re-write, expect financial institutions to lean on the support of automated technology to connect communication and trade data so that compliance teams can be empowered to check exceptional swaps trades almost instantly.”
The CFTC is also soliciting public comment on a joint request submitted by Morgan Stanley Mexico, Goldman Sachs Mexico and Casa de Bolsa Finamex, requesting that the Commission determine that the capital and financial reporting laws and regulations of Mexico applicable to CFTC-registered swap dealers organized and domiciled in Mexico, and licensed with the Mexican Banking and Securities Commission (Comision Nacional Bancaria y de Valores) as broker-dealers (casa de bolsa), provide a sufficient basis for an affirmative finding of comparability with respect to the Commission’s swap dealer capital and financial reporting requirements adopted under the Commodity Exchange Act. The Commission also is soliciting public comment on a proposed order providing for the conditional availability of substituted compliance in connection with the application.
Both proposals will be available for comment via the CFTC Comments Portal at: https://comments.cftc.gov.
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