ISDA Urges EU to “Seize the Moment” on Reporting

In a blog published by the association, Scott O’Malia, chief executive of the ISDA, has called on European Union authorities to “seize the moment” to fix the reporting “burden” through a process of collaboration and simplification.

Industry bodies have long commented on the complicated, inconsistent and duplicative rules from various regulators around the world, although O’Malia stresses that some of the greater challenges have been overcome by the private and public sectors working together. “We now have an opportunity to take a similar approach to fix the problems that have hindered trade reporting and prevented regulators from building a complete and accurate picture of derivatives trading activity,” he writes.

A key challenge that has been acknowledged by both sides is efficient regulator access to information in trade repositories, leading to the European Securities and Markets Authority (ESMA) publishing a consultation paper on how to simplify reporting. O’Malia notes that an industry response to the consultation found “a clear consensus on the key issues that drive up the cost of reporting in the EU”.

These include, he writes, the obligation for both parties to report the same trade, duplicative requirements under multiple regulations for the same derivatives instruments to be reported and frequent changes in regulatory requirements that lead to further inconsistencies and duplication.

O’Malia calls for a holistic review of the EU’s multiple reporting regimes to clearly identify what information regulators need and to crystallise the reporting inefficiencies encountered by market participants. “This would pave the way towards a single regime that optimises reporting and enhances its value for the public sector, while reducing the burden for the market,” he states.

It is not all on the regulators, however, for O’Malia also observes that market participants must make sure they interpret and implement improved reporting requirements accurately and consistently. “The most effective way to achieve this is by digitising the rules and using that as the basis for implementation,” he writes, in a nod to ISDA’s Digital Regulatory Reporting initiative, which he commits to evolving to keep pace with any new changes.

“As it moves forward with its objective to simplify and reduce the reporting burden, ESMA has the opportunity to make meaningful, lasting change,” O’Malia writes. “We support its proposal to clearly delineate reporting by instrument type, with exchange-traded derivatives reported under MIFIR, OTC derivatives under EMIR and securities remaining under SFTR. We also support the removal of the dual-sided reporting model to align with other jurisdictions where only one party is required to report a trade. This will significantly reduce the number of reports, avoid mismatches in what is reported and simplify processes. “We’re strongly in favour of the removal of unnecessary or duplicative data fields,” he continues. “For example, market participants should not be required to report information that is already available to regulators through the entity- and transaction-level data embedded within legal entity identifiers and unique product identifiers.

“We urge ESMA to push through these changes, which would bring significant improvements to the data set available to EU regulators and ease the trade reporting burden for market participants,” he adds.