CFTC Chair Massad Recommends Ways to Improve Swap Data Reporting
Commentary by Steven Lofchie
CFTC Chair Timothy Massad provided updates on the CFTC's efforts to improve swap data reporting.
Chair Massad recommended the following measures for the improvement of swap data reporting:
- Making Sure the Data Is Complete: Chair Massad (i) encouraged swap data repositories ("SDRs") to utilize heat maps and similar tools to improve the quality of reporting; (ii) asserted that the CFTC should "empower" the SDRs to validate the completeness and accuracy of the data prior to submission; (iii) specified that if a SDR rejects a participant's submission, then the participant should be considered out of compliance with CFTC requirements; and (v) urged the CFTC to hold the SDRs accountable for manner in which they collect, compile and report their data.
- Making Sure the Data Is Consistent and High Quality: Chair Massad highlighted the CFTC's development of proposals to standardize fields in swap data reporting in order to "reduce reporting burdens and enhance quality of data for everyone."
- Refining Swap Identifiers: Chair Massad said that the CFTC is developing effective means for identifying swaps and swap activity by participant, transaction and product type throughout the life cycle of a swap by utilizing measures such as the Legal Entity, Unique Transaction and Unique Product Identifiers.
- Clarifying Reporting Obligations and Eliminating Unnecessary Reporting Obligations: Chair Massad listed the CFTC's efforts to clarify (i) who has the obligation to report data, (ii) what data they must report and (iii) which reporting obligations are unnecessary - all of which will be implemented by the creation of a simple and consistent process for the reporting of cleared swaps.
- Enforcing Reporting Obligations: Chair Massad emphasized that the CFTC "will not hesitate to carry out enforcement actions" against industry participants who do not effect timely, complete and accurate reporting.
Chair Massad stated that a preliminary report on the swap dealer de minimis exception should be released for public comment before the end of the month.
He reasserted that progress has been made in swap data reporting. "Today," he said, "we have much greater transparency, which benefits regulators as well as market participants. As we refine the data and reporting system over time, we will further enhance that transparency and the resiliency of our financial system."
Chair Massad delivered his remarks before the Futures Industry Association Futures and Options Expo.
See: Chair Massad's Keynote Remarks.
See also: Chart Showing LEIs by Jurisdiction.
Related news: CFTC Proposes Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps (with Zwirb Comment and Delta Strategy Group Summary) (August 19, 2015).
Commentary
For the CFTC to look at the quality of the data that it requires is certainly to the good. The reality is that the financial industry spent huge amounts of money complying with requirements to provide useless information to regulators. The financial regulators, and not only the CFTC, should (i) determine which information is useful among themselves, (ii) identify the most efficient way to obtain that information and (iii) agree not to impose any information requirements on the industry until after they nail down the process through which the information will be provided, received and analyzed.