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CFTC Shorts, Part 1

What is CFTC Swap Reporting 2.0? 


This article is the first part of the ‘CFTC Shorts’, a series of bite-sized discussions around various aspects of the proposed changes to Dodd-Frank Part 43 & 45. Alan McIntyre, Senior BA and Industry Relations Lead at RegTek.Solutions drills into various aspects of the reporting requirements and identifies some of the challenges that firms will need to consider.

The reporting of OTC derivative transactions in the US commenced way back in January 2013 and was implemented under the snappily titled Dodd-Frank Wall Street Reform and Consumer Protection Act. The reporting components of the Dodd-Frank Act mandated reporting of all OTC derivative transactions and activity to newly created Swap Data Repositories (SDRs). This reporting of all OTC swaps was enacted under two pieces of legislation:

Little wonder then that the industry settled upon the shorthand of “CFTC Reporting” or occasionally “Dodd-Frank reporting”.

So what’s changing then that I’m wasting precious ink, pixels and of course your valuable time?

Well a lot of water has gone under the bridge since January 2013 and the CFTC has been busy since then on a few fronts that are resulting in them undertaking the massive and costly project of rewriting the swap reporting rules.

Improving data quality

First and foremost they have been assessing the quality of the data being reported to the various SDRs and they have concluded that it’s not up to scratch. The regulator is on record as stating that a combination of principles based reporting rules combined with the various SDRs supporting different fields and formats have resulted in much of the swap data reported since 2013 being very difficult to use and interpret.

Covet thy neighbour

Secondly, they have been casting an ever vigilant and it would appear at times covetous eye to the approaches to OTC derivative reporting undertaken by its poker buddies in other G20 countries. Since January 2013 many of the G20 regulators have rolled out OTC derivative reporting regimes and if there’s one thing they have in common, it’s that they are all different. The oft cited quote about standards comes to mind: The nice thing about standards is that you have so many to choose from.

Seeking help from above

Finally, there is also the work happening above G20 regulators. The FSB and CPMI-IOSCO have been busy trying to define international harmonization standards across various initiatives. This includes reviewing the UPI, UTI and LEI frameworks, as well as the definitions of usage and population of certain fields. The CFTC has been gazing upwards as well it seems, and has engaged in these supra-national efforts with a view to incorporate some of the best practices and proposed global standards into its own reporting rulebook.

So in a few words: CFTC Swap Reporting 2.0 is the US regulator seeking to improve the derivative reporting rules based on their own reporting experience to date, the accumulated knowledge from the efforts of other G20 regulators and the harmonisation work undertaken at the supranational level.


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