BIS Report Sets Out Governance of Key OTC Derivatives Data Elements

A new report published by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO), identifies key criteria, functions and bodies for the governance arrangements for a set of critical data elements for OTC derivative transactions reported to trade repositories, excluding the Unique Transaction Identifier (UTI) and the Unique Product Identifier (UPI).

In 2009, the G20 Leaders agreed that all OTC derivatives transactions should be reported to trade repositories (TRs) to improve transparency, mitigate systemic risk and prevent market abuse. Aggregation of the data being reported across TRs will help authorities to obtain a comprehensive view of the OTC derivatives market and activity, the report says, adding that such aggregation is feasible only if standardisation and harmonisation of important data elements is completed.

The CPMI and IOSCO have developed global guidance on harmonisation of the UTI, UPI and other critical OTC derivatives data elements (CDE) that may be reported to TRs. The key arrangements that govern the maintenance, oversight and global implementation are that the CDE governance functions cover three broad areas: maintenance, oversight, and implementation and that the effective execution of the CDE governance functions requires three different bodies, with different expertise and playing different roles: a Maintenance Body, an International Governance Body and Authorities.

The report also says that the execution of several maintenance functions should be assigned to the Maintenance Body and that the International Organization for Standardization (ISO) should take up this role, adding that CDE should be included in the ISO 20022 data dictionary rather than adopting each of the CDE data elements as a separate ISO standard and that ISO 20022-compliant message(s) for CDE should be developed.

Jurisdiction-level implementation of CDE across all jurisdictions should be completed within three years from when the report is published, it stresses, adding that in light of the varying scope of changes required in different jurisdictions, the CPMI and IOSCO do not believe that authorities should seek to coordinate CDE implementation timelines across jurisdictions.

Furthermore, in coordination with the Financial Stability Board (FSB) in its capacity as the international body in charge of defining the Governance Arrangements for the UTI and the UPI, the CPMI and IOSCO conclude that the Regulatory Oversight Committee of the Global Legal Entity Identifier System (LEI ROC) is, subject to some necessary adaptations to its existing governance to make it fit for purpose for CDE governance, best positioned to take on the role of the International Governance Body for CDE by mid-2020, and, in the interim, the FSB will take on the functions that are allocated to the International Governance Body.

The bodies say the report “is a further step towards fulfilling the Group of 20’s commitment to report all OTC derivatives contracts to trade repositories” and aims to improve transparency, mitigate systemic risk and prevent market abuse. “Aggregating the data reported across trade repositories will help ensure that authorities have a comprehensive overview of the OTC derivatives market and its activity,” it adds.

Colin Lambert

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