The Financial Conduct Authority (FCA) has admitted at a conference for data managers that data issues did not get the consideration they deserved when trade reporting regulations were being drafted. Moreover, this failure is reflected in the recent decision by the European Securities and Markets Authority (ESMA) to consult on changes to the trade reporting rules under EMIR, the European Markets and Infrastructure Regulations.
ESMA said in its consultation: “The practical implementation of EMIR reporting showed some shortcomings and highlighted particular instances where improvements could usefully be made so that the EMIR reports better fulfil their objectives.”
Tom Springbett, head of the FCA’s OTC derivatives and post-trade policy, said in a discussion panel at the recent FIMA Europe conference that data professionals need to make sure they are “closely engaged” with regulators.
“And I think the data stuff maybe didn’t get the prominence it deserves and to some extent we’re fixing the problems that arose because of that now. That’s a lesson for us as regulators.”
There was also a lesson for data professionals: “The engagement that we got at that stage wasn’t as intense as it could have been,” Springbett said. “If we had a big bank coming in to talk to us about EMIR technical standards back in early 2012 then we’d have a slot built in at the end to talk [about data] at the end but it would usually get pushed out because we’d overrun on other things.”
He suggested that the next time there is “a big regulatory initiative around data” that the people working on data within firms should “make sure that their messages are getting adequate prominence.”
Chris Johnson, head of product management, market data services, at HSBC Securities Services, said that while banks have to, by definition, give the regulators the same answers for each of the trade reporting data fields, “we don’t have a great track record over the last 30 years of banks collaborating over things like [data issues]”.
He added that if regulators “pick off each firm individually” they will get different answers. What was needed, he said, was “collaboration to get harmonised answers, which is what we all need because there is no commercial benefit in us doing things differently.”
Johnson said that, across multiple regulations such as EMIR, MiFID (Market in Financial Instruments Directive), AIFMD (Alternative Investment Fund Managers Directve) and Solvency II, there were different ‘asset type’ data fields. “We are grappling with these different needs,” he said. “Why can’t we get a consistent single version for all the regulations that means we can do things once?”
Springbett said that that was “a desirable objective” and that “ESMA is definitely pushing in that direction”.
“I do certainly sense a greater determination to fix these inconsistencies and to have single standards,” he said, but “it will certainly take a while”. Sprinbett added that different regulators had different purposes: “If I’m a derivatives markets supervisor looking at MiFID or EMIR trade transaction report s I probably want something rather more granular than if I’m an asset manager supervisor who wants to know what an asset manager’s basic business is. But certainly the regulator community is very much bought into the [single standards] objective and heading in the right direction at least.”