CFTC Commissioner Brian Quintenz recommended various improvements to the swap data reporting regime, including advancing global harmonization efforts, streamlining reporting requirements and enhancing reporting accuracy.
Mr. Quintenz asserted that there is still room for improvement in swap data reporting. He acknowledged that mandatory swap reporting to swaps data repositories ("SDRs") and, in turn, anonymous publishing of data for the public, improved transparency. At the same time, however, he noted that submissions were often incorrect or incomplete, detracting from the value of the data sets. While Mr. Quintenz said that 95% of credit default swap trades now have complete counterparty and price information, he stated that other areas that contribute to market transparency are still lacking.
Mr. Quintenz said that difficulties in harmonizing data reporting standards across jurisdictions have hindered the ability of regulators to easily analyze swap data and measure risk exposures in the market. He noted substantial progress in this area, including the development of unique product identifiers regarding OTC transactions across jurisdictions and forthcoming guidance regarding critical data elements. If harmonization efforts are integrated as planned, Mr. Quintenz concluded, there is potential for easier and more accurate global aggregation and measurement of risk.
Mr. Quintenz referenced a review by the Division of Market Oversight that identified two "primary objectives" for enhancing the CFTC swap data reporting regime: (i) receiving accurate, complete and high-quality transactional data, and (ii) streamlining reporting from market participants. Acknowledging certain ambiguity regarding the responsibilities of each counterparty for verifying the accuracy of SDR data, Mr. Quintenz contended that the reporting counterparty is the logical entity to confirm the accuracy of data. Mr. Quintenz further argued that SDRs should be required to reject trades with incomplete data fields and that the CFTC should develop clear standards for fields that are required to be reported for an SDR to consider it complete. He also suggested lengthening reporting deadlines, perhaps by moving to a T+1 deadline.
Finally, Mr. Quintenz advocated for the CFTC to propose data fields that are consistent with Committee on Payments and Infrastructures and the International Organization of Securities Commissioners (CPMI-IOSCO) guidance for both real-time and regulatory reporting. He emphasized the importance of working to advance harmonization efforts to maximize ability to aggregate global data.
Commentary / Steven Lofchie
Whatever the regulators eventually do with trade reporting and trade data, they should focus on getting data that is useful and not on getting data fast or in quantity. It has been too often the case that Congress or the regulators assume that "knowledge is good," and so mandate that the industry provide data without considering how it can be standardized, transmitted, stored and used. While Form PF for hedge funds is a prime example of collecting useless data (primarily because of the poor design of the questions), the absolute standard for useless data has to be CFTC Rules Part 44, which required reporting information as to swaps that were entered into before the enactment of Dodd-Frank. Presumably, the regulators will find a use for that data some time after Jimmy Hoffa's body is located (assuming it is not in the same landfill).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
