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

FCA mulls legal powers for USD Libor holdouts

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

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