There are too many trade repositories (TRs) in the world collecting data on the $700 trillion derivatives market, according to the head of the global body for market regulators.
There are now 25 trade TRs established in 11 jurisdictions since the G20 called for the creation of a system to monitor systemic risks. David Wright (pictured), secretary general of the International Organisation of Securities Commissions (IOSCO), said at an International Swaps and Derivatives Association (ISDA) meeting in Singapore that “the plugs don’t fit”, the Financial Times reported.
“We must have the data we need in order to be able to judge whether risk is building up in different parts of the markets and an understanding of how markets are interconnected, to spot contagion channels.“
In February, the Financial Stability Board (FSB) launched a consultation on how best to aggregate OTC derivatives data across borders, looking in particular at three possible options:
- Option 1: A physically centralised model, in which a central database collects and stores the required transaction, position and collateral data from TRs;
- Option 2: A logically centralised model where data collection and storage is “federated” (ie, physically decentralised) but instead would rely on a central logical catalogue or index to identify the location of data resident in the TRs;
- Option 3: The collection and aggregation by individual authorities themselves of raw data from the TRs. This is the current position. Although it would be possible for regulators to expand their cross-border access to data through international agreements, truly global and comprehensive data aggregation does not seem possible with this model.
In September the FSB said that options 1 and 2 were “highly preferable”.
But Scott O’Malia, chief executive of the International Swaps and Derivatives Association (ISDA) called the creation of a single centralised repository a “dream”, the FT said .
There is currently no framework that allows global regulators to monitor risk in cross-border markets and that some countries’ data privacy laws prevent them from sharing data across borders. Australia and Singapore, however, recently agreed to allow their regulators to get access to each other’s trading data.