Global Financial Strategy - Requirements for OTC trades released

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Requirements for OTC trades released

Tuesday 17 January 2012 – by [email protected]

Data that should be collected by trade repositories to reveal more about OTC derivatives markets has been released by an international task force.

As a minimum, TRs should collect transaction data relating to economics, information on both counterparties, details of the underlying products and prices, and operational and event data, a report from the Committee on Payment and Settlement Systems and the technical committee of the International Organization of Securities Commissions recommends.

Additional data, such as that contained in master agreements and credit support annexes, would be beneficial for assessing systemic risk but at present is not supported by TRs, it says. Released on Tuesday, the report contains a number of measures recommending how TRs could incorporate these measures into their practices.

In 2009 the G20 agreed that all OTC contracts should be reported to TRs to improve transparency, mitigate systemic risk and protect against market abuse in the OTC derivatives markets.

However the task force says it is not within the scope of the report to say which specific authorities should have access to TR’s data. Instead it says that principles should be set out governing whether the likes of central banks, prudential supervisors and resolution authorities should have access to relevant parts or the whole range of data held by TRs.

Additionally it calls for the “expeditious development and implementation” of a legal entity identifier, which would standardise references to different entities involved in OTC trades.

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To help ensure that current industry efforts to develop an international LEI involve both public and private sector input, it recommends that the industry process includes development of an LEI and issuance of LEIs “under the auspices of an organisation with international membership that develops and publishes international standards for the financial sector,” it says.

Separately, it calls for the FSB to lead a standard product classification system used to categorise and describe OTC products.

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