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BNP Paribas has implemented and tested a new initiative to enable digital regulatory reporting under the US Commodity Futures Trading Commission’s (CFTC) amended swap data reporting rules.
The International Swaps and Derivatives Association’s (ISDA’s) Digital Regulatory Reporting (DRR) initiative has been deployed in a real-world, production-level environment for the first time, leading to a submission of data to the Depository Trust & Clearing Corporation’s (DTCC’s) swap data repository (SDR).
The success of this test demonstrates that DRR can be successfully used for end-to-end implementation of the CFTC swap data reporting requirements, says ISDA.
The CFTC will amend its swap data reporting framework to incorporate harmonised critical data elements developed by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions, with the initial round of changes coming into effect on 5 December.
The DRR initiative is intended to create efficiency as firms adapt their reporting systems to comply with changes to reporting rules, and to improve the accuracy and consistency of what is reported.
According to ISDA, DRR will avoid the inconsistencies that can emerge when each firm takes its own interpretation of a written set of rules by providing a collective, mutualised interpretation of the relevant CFTC rule amendments.
The Common Domain Model (CDM) will be used to transform that interpretation into an open-source, human-readable and machine-executable code that firms can use as the basis for implementation, or to check that their own interpretation of the rules is consistent with the peer-reviewed industry version.
ISDA’s chief executive Scott O’Malia comments: “The DRR is a win-win for the industry and regulators — it will not only increase efficiency and reduce costs for firms, but will also result in better quality and more accurate data for regulators, helping them to monitor potential sources of risk.”
Harry McAllister, information architect at BNP Paribas, says the firm has completed the necessary internal adaptations — including converting its internal trade and counterparty data to a CDM format — and is now in a position to implement the DRR for CFTC Rewrite.
Commenting on the news, Leo Labeis, CEO at REGnosys, says: “Ultimately, this year’s cross-industry effort to tackle the US regime will have a major impact on future regulatory reporting practices. Where previous collaborative ventures have run against the lack of effective tools, DRR equips the sector with the necessary capabilities to work together in open source.
“The CFTC Rewrite is the first and crucial implementation of this new approach. Firms which invest now will have a strong foundation for subsequent amendments, including EMIR Refit and several Asia-Pacific regimes coming in 2024 and beyond.”
The ISDA working group is working to digitise revised reporting requirements under the European Market Infrastructure Regulation (EMIR), expected to come into force in 2024.
The association estimates that 70 per cent of the coded CFTC rules are expected to directly transfer to the DRR for EMIR, while 90 per cent of the combined coded US and European rules may transfer to the DRRs for Asia-Pacific.
