The European Securities and Markets Authority should open up access to centralized trade reporting data to both market participants and other regulators in order to lower costs across the industry.
Trade reporting in the European Union under Emir, the regulation covering central clearing, was two years old on 12 February 2016 according to Abide Financial, which provides trade reporting services. However there are still problems with the quality of data being supplied to the authorised trade repositories.
Esma carried out a consultation on access, aggregation and comparison of trade repository data between 11 December 2015 and 1 February 2016 ahead of the rewrite of the Emir regulatory technical standards. In addition the European Commission has agreed a one-year delay for MiFID II, the incoming regulation covering European financial markets, to January 2018 so Esma has time to create a central data hub of transaction reports and reference data across asset classes in order to implement the legislation.
The DTCC Derivatives Repository said in it response that the absence of industry standards and lack of regulatory harmonization has hampered the ability to effectively aggregate data and has contributed to diluted data quality. “The collection of data, without the ability for regulators to turn it into meaningful analytical information, falls significantly short of the G20 goals outlined in the 2009 Pittsburgh Summit,” added the DTCC repository.
Amundi Asset Management, the merged asset management operations of French banks Credit Agricole and Societe Generale, said its response was limited to its involvement in the derivatives markets as it is not a member of a central clearing counterparty and does not run a trade repository. The fund manager continued that extra requirements on trade repositories will most likely lead to higher costs.
“We are very sensitive on this topic as end investors such as asset managers and their clients are to suffer higher costs and lower performances,” Amundi added.
Amundi said it agreed with Esma that specific attention should be dedicated to the output formats and data exchange standards to support the common reference to ISO standards. “As mentioned open source standard must be preferred to avoid massive cost inflation. We feel that the choice of XML is relevant,” added the response.
The fund manager also urged Esma to ensure that market participants can access the centralized data being collected by the regulator under MiFID II.
The DTCC Derivatives Repository also criticised the current plans under which Esma’s centralised data hub will only be used by national regulators, and only those national regulators who have signed up to support the initiative.
“Given the cost to the trade repositories, and to Esma and the national component authorities, of developing this solution, DDRL suggests that the infrastructure should be used not only for the purpose of providing data reported under EMIR to the NCAs, but also for providing this data to other regulators,” said the DTCC response. “If the data access hub were to become the core reporting mechanism for all regulations and all regulators then DDRL recommends that all other existing delivery mechanisms are decommissioned providing significantly improved cost benefit to all parties concerned.”
CME Trade Repository said in its response that the trade reporting process has been challenging given the irregularity of the communication between Esma and trade repositories.
“From an overall cost perspective, the building of Trace will incur disproportionate costs, which amounts to approximately one-third of the entire MiFID II implementation budget for CME Group,” added the response. “Additionally, the timing of the additional IT work is problematic, given the cumulative impact of regulations currently being implemented or reviewed (MiFID II, EMIR Review, SFTR). CME ETR suggests postponing any new projects until there is more clarity of the regulatory landscape and implementation.”
CME Trade Repository said the delay of MiFID II to 2018 will give more time for firms and national regulators to develop their systems to be able transmit and handle the transaction data accordingly. “By aligning the access of data within these two regimes, we will be able to deliver reports in a format that national component authorities already understand and consume in a quicker timeframe,” the CME continued.
ICE Trade Vault also warned that the timeline for implementation for amending the Emir regulatory technical standards should be extended.
Anthony Arnold, regulatory affairs and compliance director at Abide, said in a blog that Esma has not set a date for the Emir technical standard rewrite though current market projections of the first quarter of next year seem realistic, and potentially could be as early as 12 February.
Arnold said Esma has also recently published its 2016 supervisory priorities for trade repositories, as well as its annual report summarising key supervisory work and actions undertaken in 2015. “The timing of the report serves as a gentle reminder to us all that Emir reporting requirements continue to evolve and that trade repositories and reporting entities need to adapt and plan implementation schedules accordingly,” he added.
