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Rule 10c-1a is “ going to be transformative”, said Igor Kaplun, global head of business development, S&P Global Market Intelligence Cappitech, at the Securities Finance Symposium.
The new regulation was introduced by the Securities and Exchange Commission (SEC) to increase transparency in the market. It requires the reporting agent to report information to a registered national securities association (RNSA) by the end of the same day as the transaction.
The panel discussion focused on the inherent challenges this regulation will bring. Jonathan Lee argued the rule is “more complex” than it first appears: “It will be expensive to implement, and difficult to put into practice,” he explained.
The panel concurred, predicting an extension would be needed for market participants to respond effectively.
Another panellist held a more optimistic view, arguing that the regulation would be a chance to make improvements within the market. He explained how firms are struggling with dealing with data quality and suggested the new regulation could help to mitigate this.
In the second half of the panel, discussion shifted to the Office of Financial Research’s (OFR) final rule, adopted on 6 May.
According to the OFR, the Final Rule aims to improve transparency within the US repo market by establishing a data collection for non-centrally cleared bilateral transactions.
However, once again, the panellists voiced similar concerns. Jonathan Lee’s discussion of the various ways this rule would manifest, including daily reporting to the OFR by US covered reporters, elicited an audible response for audience members.
Lee described the “rude awakening” the rule will have on various market participants. “Firms have got a very short space of time to implement what's going to be highly scrutinised reporting,” he said.
“This won’t just be in the US, but on a global basis. It's very much front and centre of systemic risk.”
Despite the panel’s consideration of the challenges posed by upcoming regulation, Kaplun upheld a measured stance of the regulatory process.
“The first rollout is never going to be perfect,” he argued, highlighting the various alterations that have been made to regulations over the past year, across various jurisdictions.
“The goal of the regulator is to use that data to monitor systemic risk. It’s not just getting data in, but asking does this data make sense, and what does it say?”
