CFTC Commissioner Brian Quintenz suggested various improvements to the swap data reporting regime, including advancing global harmonization efforts, streamlining reporting requirements and enhancing reporting accuracy.
Mr. Quintenz asserted that, while significant progress has been made in the area of swap data reporting, there is still room for improvement. For instance, he explained that implementation of mandatory swap reporting to swaps data repositories (“SDRs”) and, in turn, anonymous publishing of data for the public, improved transparency; at the same time, submissions were often incorrect or incomplete, detracting from the value of the data sets. While Mr. Quintenz said that 95% of credit default swap trades now have complete counterparty and price information, he acknowledged that other areas that contribute to market transparency are still lacking.
Mr. Quintenz said that difficulties in harmonizing data reporting standards across jurisdictions has hindered the ability of regulators to easily analyze swap data and measure risk exposures in the market. He added that there has been substantial progress in this area, with the development of unique product identifiers to identify OTC transactions across jurisdictions and forthcoming guidance regarding critical data elements. If harmonization efforts are integrated as planned, Mr. Quintenz sees potential for easier and more accurate global aggregation and measurement of risk.
Mr. Quintenz referenced a review by the Division of Market Oversight that identified two “primary objectives” for enhancing the CFTC swap data reporting regime: (i) receiving accurate, complete and high-quality transactional data, and (ii) streamlining reporting from market participants. Acknowledging certain ambiguity regarding the responsibilities of each counterparty for verifying the accuracy of SDR data, Mr. Quintenz contended that the reporting counterparty is the logical entity to confirm the accuracy of data. Mr. Quintenz further argued that SDRs should be required to reject trades with incomplete data fields and that the CFTC should develop clear standards for fields that are required to be reported for an SDR to consider it complete. He also suggested lengthening reporting deadlines, perhaps by moving to a T+1 deadline.
Finally, Mr. Quintenz advocated for the CFTC to propose data fields that are consistent with Committee on Payments and Infrastructures and the International Organization of Securities Commissioners (CPMI-IOSCO) guidance for both real-time and regulatory reporting. He emphasized the importance of working to advance harmonization efforts to maximize ability to aggregate global data.
Lofchie Comment: Whatever the regulators eventually do with trade reporting and trade data, they should focus on getting data that is useful and not on getting data fast or in quantity. It has been too often the case that Congress or the regulators declare that “knowledge is good,” and they mandate that the industry provide data without considering how it can be standardized, transmitted, stored and used. While Form PF for hedge funds is my ordinary whipping post for the collection of useless data because of the poor design of the questions, in truth the absolute standard for useless data has to be CFTC Rules Part 44, which required reporting to the regulators information as to swaps that were entered into before the enactment of Dodd-Frank. Presumably, the regulators will find a use for the data some time after the location of Jimmy Hoffa’s body (assuming it is not in the same landfill).