UK supervisor rejects concerns over reg reporting burden
FCA official says data from new requirements doesn’t go into “black hole” but supports risk monitoring
A UK Financial Conduct Authority (FCA) official has pushed back on industry complaints about new regulatory reporting requirements, insisting the data isn’t going into a “black hole” and can help it better fulfil its role, including tackling systemic risk.
Market participants will soon need to fill out up to 203 data fields for monitoring systemic risk, resulting from the update to European Market Infrastructure Regulation derivatives transaction reporting rules, known as Emir Refit.
Speaking on a panel at the Futures Industry Association’s International Derivatives Expo in London on June 18, industry representatives queried whether industry bodies really need all that data. But Carmel Deenmamode, a manager in the market conduct and post-trade policy team at the FCA, defended the need for the elevated level of regulatory reporting.
“I can absolutely reassure you that it is not going through a black hole, we are absolutely using it,” said Deenmamode.
She said it is a question that the supervisor itself is frequently asked, as the contributors of the data often don’t see the output. As well as being used for market monitoring and for regulators to assess systemic risk and financial stability risks inherent in the derivatives market, it informs briefings taken to senior committees.
The data is also useful during crises. The Emir dataset was one of the key datasets used to inform regulators how markets operate during the Covid-19 pandemic, the March 2020 dash for cash, the liability-driven investment crisis, and the Russia-Ukraine war.
In addition, it supports policy recommendations. Deenmamode gave the example of last year when UK regulators extended the exemption from bilateral margin requirements for equity options. The data was used to identify the main players in that market and its volumes. Similarly, as a supervisory tool, the data can give the regulator information about an individual firm’s portfolios to identify risks and take action as a result.
The data is also used to monitor market initiatives – the Libor transition being one of the key instances – as well as supporting the UK view of proposals from international bodies.
It was also noted that the Bank of England utilises Emir data in its monthly monetary policy committee meetings.
Duplication and complexity
Later during the panel discussion, four panellists were asked whether regulatory bodies really needed up to 203 fields for monitoring systemic risk.
Voting “no” were Mihir Trivedi, head of global regulatory change at Deutsche Bank; Nicholas Bruce, head of business development at Regis Trade Repository; and Sanna Kamptz, head of regulatory reporting at LME Group.
Timothy Hartley, Emir reporting director at Kaizen Reporting, said the “answer is probably no”, but added that he expects the European Securities and Markets Authority to reduce duplicative fields in EU reporting related to the unique product identifier code.
Deutsche Bank’s Trivedi said that because the bank has many products across foreign exchange, commodities and rates, for example, the increased fields of regulatory reporting “creates a large complexity” as each product has a different subset of logic and required information.
In the European Union, Emir Refit went live on April 29, seeing the number of reportable fields increase from 129 to 203. Emir was onshored into UK legislation post-Brexit, and the UK version of Emir Refit is due to go live on September 30.
Asked by LME’s Kamptz when the Emir Refit Q&A from the FCA consultation that closed last week would be published – and if that could change how institutions have implemented the new regime – the FCA’s Deenmamode said the regulator is reviewing the responses and aims to finalise the document by early July.
Deenmamode hopes the Q&As will not throw up any issues that require significant change on the part of institutions.
“That’s what we want to avoid. We just want these Q&As to provide additional clarity without making too many changes that are significant. We are aware that we do not want to be putting things out last minute,” she said.
She added that the regulator is not planning to put out further Q&As ahead of September, as “we want to give you the time to concentrate on go-live.”
Editing by Lukas Becker
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Markets
India delays initial margin go-live date
RBI communicated putting off initial margin rules one day before planned November 8 implementation
Clearing bottlenecks blamed for muted volumes at FMX
Regulatory hurdles and market conditions have also hampered CME rival since its September launch
JPM sees upside in blurring lines between QIS and SMAs
Hedge funds are combining their strategies with bank indexes to create new products
Hedge funds take profit on vol trades with Trump win
FX volatility drops sharply as positions unwind; rates market sees mixed reaction
Shanghai Clearing House urged to take bond collateral for FX trades
Dealers complain that feeble interest rate paid on cash margin raises cost of clearing
BofA’s e-FX rebuild pulls it closer to rivals
Deploying its equities tech stack, bank seeks to get ahead of the pack with algo and e-FX offerings
Corporates look to tackle unhedgeable inflation indexes
As inflation risks mount for corporates, some are finding their exposures are linked to niche indexes
Talking Heads 2024: All eyes on US equities
How the tech-driven S&P 500 surge has impacted thinking at five market participants