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Compliance concerns will escalate considerably once the first fine is issued, says one panellist at this year’s Securities Finance Technology Symposium.
During the events first panel, SFTR and Now, issues with the reconciliation and work the industry is doing to drive best practices, in regards to Securities Finance Transactions Regulation (SFTR), was discussed.
Panellists included Tomas Bochicchio, SFTR director of product management at DTCC;
Adrian Dale, head of regulation and market practice at ISLA; Jonathan Lee, senior regulatory reporting specialist at Kaizen Reporting; and Joanne Salkeld, SFTR product manager at MarketAxess.
Speaking on these issues, one panellist says: “The validation rules still remain quite loose and yet they’re viewed by the regulators as a reliable benchmark. Unfortunately, reporting a valid transaction or a valid action is certainly no guarantee of the accuracy of that report. The vast majority of the reports that we test are valid, they pass the validation rules of the trade repository, but they are wrong in one or more of the details that are reported.
“Data quality is absolutely key and absolutely fundamental to the regulators being able to use this data for the intended purpose.”
David Lewis, senior director of securities finance at FIS Global, who led the discussion, turned to another panellist for a response to this compliance concern.
That panellist says: “I don’t think we’re there quite yet. If someone’s done something wrong, you don’t immediately jump in with fines all over the place like some sort of crazed gunman.” He goes on to explain the “much more mature” approach that would take place in this situation, suggesting if one firm is reporting incorrectly then there is a possibility that “a bunch of other firms are doing something incorrectly”.
Supporting the original point of concern, another panellist adds: “You can pass the tests and you can send valid data in but if you’re not measuring something properly, you’re not going to be able to manage it properly. That’s a big concern I think.”
It was concluded that as a general rule, in the beginning of regulation, data quality is going to be lacking and over time we’ll see that data quality being improved, more regulations will come out and validation rules will change.
