by Alan McIntyre, Industry Relations Lead
I attended an industry event on the EMIR RTS ReWrite recently and the main presenter was discussing the continuing pace of change. The changes being discussed include the RTS ReWrite, MiFIR, SFTR and the significant scope of these changes. He quipped that, “as a contractor once said to me, it’s the gift that keeps on giving!”. I smiled to myself as I was reasonably sure that contractor was me.
The following week I met an ex colleague for lunch and mentioned the speakers remark. The speaker being a mutual acquaintance. Before I could add that I suspected the quote was in fact mine his face lit up and he said, “That was you wasn’t it!”. Well the quote may be attributable to me. And for many of the multitude of workers (contract or otherwise) deployed across the industry to deliver these seemingly unending changes, trade reporting might well be a gift that keeps giving in terms of income and livelihoods. But it is also a task master that keeps on asking more and more.
The IT and Operations department heads who keep returning to their management for new budgets will no doubt agree. The PMO’s BA’s and Developers who keep gathering to plan and implement the latest changes will likewise nod their assent. The Vendors and Consultancies that are frenetically adapting their offerings to service the continually evolving opportunities know what I mean. And let’s not lose sight of the poor regulators themselves. They not only had to devise and pass into law the latest rules. But they also need to work tirelessly to facilitate the industry in adopting them. And that’s before we consider that the regulators face the not so small task of (gulp!) policing these changes. So Trade Reporting might well be the gift that keeps giving. But it’s nonetheless the slavedriver that keeps cracking the whip and insisting upon more.
Not so much by design but as the result of a bureaucratic and legislative accident, i.e. unfortunate holdups in the corridors of Brussels, Luxembourg and Paris, we also have the rather unfortunate confluence of the EMIR Article 9 RTS ReWrite coming into force only 2 months before the juggernaut that is MiFID II going live. Trade/Transaction reporting teams across the industry having the very different competing demands of MiFIR (MiFID II’s Transaction Reporting component) and such a substantial change to EMIR reporting is an unenviable (and let’s be honest, unwelcome) set of challenges to balance.
Many commentators including myself have noted that the EMIR RTS changes are not getting the attention they deserve because MiFID II is being such a diva and hogging the limelight. Having worked extensively on the MiFIR RTS 23 and working with our clients I understand the sheer scale of the MiFIR challenges and in no way wish to imply it does not deserve the focus it is getting. Firms are rightly devoting a great deal of attention to it. However, at the same time my fears that the EMIR RTS changes were perhaps being under-estimated were validated when sources at two of the leading Trade Repositories told me that they were seeing significantly fewer firms testing the EMIR RTS than they saw this time two years ago (jeez, was it really two years!) for the ESMA Level 2 validations.
I worked extensively on the ESMA Level 2 validations and likewise I’ve worked similarly strenuously on the RTS ReWrite changes. There is no doubt whatsoever in my mind that the scale of the RTS changes are greater and more demanding than those of the Level 2 validations. If it is indeed true that less firms tested the RTS compared to the Level 2s then I’m concerned that some of those firms are really going to struggle now the new RTS format is live (as of October 30th). I’ve been asked twice by senior people in the last few weeks what would happen if they do not make these changes. My response is that they will get a 100% rejection rate on day one and be unable to report until they do implement the changes. A fairly sobering thought.
For many firms the challenge of obtaining senior management attention, budget and resources for EMIR at a time when all eyes are on MiFID II are all too clear. For the regulators I wonder if there is perhaps a private fear that they have asked a little too much of some firms with two such competing demands within such a short window. However, it’s actually even worse than that. My advice is that firms should also been looking at SFTR by now. The likely implementation period (the official dates have not moved but it’s clear that 2018 is not going to happen) in 2019 might seem a long way off but make no mistake. SFTR is huge. The volumes involved. The additional number of market participants involved. The relative lack of technological sophistication when compared with the OTC markets. And the differing structures and interconnectedness. All of these in my humble opinion mean that SFTR is going to be a reporting tsunami. Let’s face it, if the so-called ‘masters of the universe’ – the OTC teams and departments that tend to be amongst the most technology rich within the banks have struggled with EMIR reporting, then the Securities Finance departments are going to have their work cut off.
At the risk of overstaying my welcome on the doom mongering soapbox it’s not over there either. MAS in Singapore has just announced the implementation date of another phase of reporting requirements as October 31st 2018. The CFTC is progressing with its own consultations that based on the documents issued to date are likely to amount to a complete reworking of the Dodd-Frank reporting implemented in 2013. And speaking of the Dodd Frank Act whatever happened to the SECs SBSR reporting. This time last year we were all prepped for the SEC to fire the starting gun by approving the SDRs for SBSR. Nothing has progressed since then it seems. But it would still be unwise to rule out the SEC giving SBSR reporting the green light sometime in 2018. And for those of us with a special place in our affections for the GTR, the DTCC will be rolling out the GTR2.0 architecture to US and Singapore data-centres in 2018 as well.
So my previous joke that trade reporting is the gift that keeps giving seems to hold as true today as it was back in 2015. I can’t say for certain but best guess was it related to ESMA taking the lead as the most demanding of the G20 regulators with the Level 1 and Level 2 validations. But it’s nonetheless the beast that keeps biting. The ask that keeps asking. And the challenge that keeps challenging. A quick glance at my in-tray is proof enough for me!