Bank Leumi USA Selects Lombard Risk’s Regulatory Reporting Solution for U.S. Reporting


Solution Allows Largest Subsidiary of the Leumi Group, Israel’s Leading Banking Group, to Automate its Regulatory Reporting Lombard Risk Management plc, a leading provider of integrated regulatory compliance and collateral management solutions for the financial services industry, is pleased to anno

via Pocket http://www.bobsguide.com//guide/news/2013/Jul/10/bank-leumi-usa-selects-lombard-risks-regulatory-reporting-solution-for-u-s-reporting.html July 10, 2013 at 07:40PM

Abacus Group Launches FlexDrive™


Abacus Group LLC, a leading provider of hosted IT solutions for hedge funds and private equity funds, today unveiled FlexDrive™, a file-hosting service that allows hedge funds and private equity firms to securely share and transfer files with other users and other devices.

via Pocket http://www.bobsguide.com/guide/news/2013/Jun/17/abacus-group-launches-flexdrivetm.html June 18, 2013 at 09:39PM

Be Open, or Be Closed Down from the TABB GROUP


Be Open, or Be Closed Down
http://tabbforum.com/opinions/be-open-or-be-closed-down?utm_source=TabbFORUM+Alerts&utm_campaign=cb21b50a39-UA-12160392-1&utm_medium=email&utm_term=0_29f4b8f8f1-cb21b50a39-271568421

Global regulators are demanding more transparency into financial firms’ activities, creating a new operating paradigm that emphasizes recordkeeping, surveillance and reporting. Firms that can’t provide the required transparency are likely to incur regulators’ wrath.
Regulators have drawn a new blueprint for capital markets, and it is not benign. Global regulators want a transparent and connected market that gives them more transparency into, and tighter controls over, systemic risk. This trend can be seen from the highest perches within the international regulatory organizations, down to the examinations and inquiries being conducted by local regulators and enforcement agencies. It will not take years to see how these regulatory changes are going to impact the industry. Change can be felt now.

The overhaul in market structure and stringent regulatory requirements open the door for new types of business models and allow greater competition within existing businesses. But no matter whether a firm is an incumbent or an agitator, there is a new paradigm for the way in which businesses must operate. There is an emphasis on recordkeeping, surveillance and reporting.

Financial institutions need to embed three elements into the heart of their regulatory and compliance philosophies: open, searchable and synchronous. Open is the willingness to change the way in which a firm delivers on its value proposition, as well as having technological agility rather than being inseparable from a particular type of software or architecture. Searchable means that any speck of information that resides within the enterprise is accessible to analysis in near real-time and that the data is stored in a way that allows relational and non-relational searches. Synchronous requires a combination of internal consistency of data and process and industry collaboration on standardization.

Let’s focus on openness for a moment. The plight facing OTC market participants is emblematic of the need and challenge of openness. Change is occurring on multiple fronts: voice to electronic, swaps to futures, discretionary access to impartial access. So to even continue to provide the core value proposition requires a strategic shift. At least one interdealer broker, GFI, is launching a futures exchange. Swaps dealers are also preparing to act as sponsored access providers.

If it is true that because the market is more open, companies need to be more open in how they provide their services, it is equally true that they need to be more open in how they operate their business, technically and organizationally. In capital markets, technology mirrors the business and is rarely the driver of true reform. The OTC derivatives market was opaque and closed and this character was reflected in the technologies that supported that market. Businesses were run as silos, with lots of overlap and redundancy, as divisions of the same bank would compete with one another. While it may seem inefficient now, it was a rational approach at the time, as revenue opportunities outpaced the need for efficiency. Not anymore. Financial institutions are going to need to operate more like fashion companies, which typically do not own a stitch of the production chain.

But openness cannot work well without a highly synchronous operating model. Operational complexity may have been acceptable in a highly fragmented, growth-oriented era. Unfortunately, that is not the era we live in, and even if it is cyclical, it is going to be an extended cycle. We now live in a period of consolidation and stagnation where standardization and economies of scale will be more important success factors than creativity and differentiation. Synchronicity will not be enabled through stronger glue alone. It requires a simpler infrastructure. The re-emergence of vertical integration between hardware and software is indicative of the demand for synchronicity.

Finally, the searchable enterprise is the end game of transparency. Regulators are increasingly focusing on unstructured data for evidence of misconduct. During the LIBOR scandal, for example, banks had emails that showed traders asking one another to manipulate rates. During regulatory examinations in 2010, requests to financial services firms for social media rose 65% compared to previous years. Even not sufficiently documenting emails can be cause for penalty in and of itself. This is pushing firms to look at NoSQL solutions for unstructured content. NoSQL allows for greater specification using intelligent pattern recognition to conduct searches, and, as importantly, does not require a technologist to write a query. NoSQL allows the end users themselves to search.

Oslo Børs Has Discovered Shortcomings In The Reporting Of Bond Trading


The duties of member firms in respect of reporting trades are stipulated in the trading rules, and member firms are required to report trades to the exchange immediately and in any case no later than 5 minutes after a trade is carried out.

via Pocket http://www.mondovisione.com/media-and-resources/news/oslo-brs-has-discovered-shortcomings-in-the-reporting-of-bond-trading/ April 26, 2013 at 02:48PM

Impendium provides EMIR Trade Repository reporting


Impendium Systems, a leading provider of regulatory applications to financial and non-financial organizations throughout the world is pleased to announce that its Elements regulatory platform will be available for reporting to approved Trade or Swaps Data Repository’s.

via Pocket http://www.bobsguide.com//guide/news/2013/Apr/25/impendium-provides-emir-trade-repository-reporting.html April 25, 2013 at 11:50PM

Sapient Global Markets Extends Compliance Management and Reporting System with Addition of Portfolio Reconciliation Capabilities


Sapient Global Markets, part of Sapient (NASDAQ: SAPE) has today announced the ability for its popular Compliance Management and Reporting System (CMRS) to facilitate portfolio reconciliation.

via Pocket http://finance.boston.com/boston/news/read/24010367/sapient_global_markets_extends_compliance_management_and_reporting_system_with_addition_of_portfolio_reconciliation_capabilities April 25, 2013 at 07:25PM

Mercer extends agreement with MSCI for InvestorForce platform


Investment decision support tools provider MSCI Inc. will provider Mercer advanced investment performance-measurement and reporting services through its InvestorForce platform.

via Pocket http://www.theasset.com/article.php?news=TA&id=24063 April 20, 2013 at 03:23PM

Swap Reporting (Summary Chart of Reporting Compliance): Who and When? – courtesy of FIA


http://www.futuresindustry.org/futures-industry.asp?iss=210&a=1558

One key provision of the Dodd-Frank Act requires reporting of over-the-counter swap transactions. The Commodity Futures Trading Commission has finalized detailed regulations in this area that are being implemented in phases. This article outlines the CFTC’s OTC reporting compliance timeline.

In late 2011 and early 2012, the CFTC finalized a series of regulations related to the reporting of swap transactions: rules governing reporting to the public, rules governing reporting to data repositories and the CFTC itself, and rules governing reporting of “historical swaps.” For all their complexity—these rules and their corresponding releases total more than 200,000 words—one aspect was relatively simple: the dates on which reporting was set to begin. Specifically, the reporting rules set three “compliance dates” for reporting:

Starting on Compliance Date One, reporting would be required for interest rate swaps and credit default swaps where at least one of the counterparties was a swap dealer or a major swap participant;

  • Ninety days later, on Compliance Date Two, reporting would be required for all other swap transactions where at least one of the counterparties was a swap dealer or MSP; and
  • Ninety days later, on Compliance Date Three, reporting would be required for all other swaps—those for which neither counterparty was a swap dealer or MSP.
  • The exact dates of Compliance Dates One, Two and Three were tied to the publication of key swaps definitional rules.

In the intervening year, these simple rules transformed into the complex timeline summarized in the accompanying chart. Below, as a supplement to the chart, we attempt to rationalize the resulting reporting structure by dividing the characteristics that establish when a particular swap must be reported along three lines: the type of reporting, the type of counterparties, and the type of swap.

Type of Reporting

Dodd-Frank requires three types of reporting of swap transactions:

     

  • SDR Reporting. Under these requirements, swap counterparties must report a host of information about swaps to new “swap data repositories” registered with the CFTC, both upon creation and throughout the life of the swap. The CFTC, but not the public, will have access to the full complement of information stored at SDRs. Mandatory SDR reporting began on Dec. 31, 2012.
  • Real-Time Reporting. Under the “real-time reporting” requirements, key information about swaps must be publicly disseminated via SDRs. This information is rendered anonymous to protect the identity of the counterparties. Delays in reporting are allowed for large “block” transactions. Until “block” is more fully defined, all swaps are subject to the “block” delay. Mandatory real-time reporting began on Dec. 31, 2012.
  • Historical Swap Reporting. SDR reporting upon execution and real-time reporting are only required for new swaps and, in some cases, material amendments to existing swaps entered into after the relevant compliance date. However, counterparties to “historical swaps” entered into before those compliance dates are required to report information to SDRs. The scope of the information reported depends on when the swap was entered into and terminated, but at a minimum, some information is required for any swap that was in existence on or after July 21, 2010. Mandatory historical swap reporting began on Jan. 30, 2013.

Under the CFTC’s final reporting rules, all three types of reporting were to begin on the same date for any given swap type and counterparty pair. Over the past year, that paradigm has changed in two key ways. First, based on input from market participants, the CFTC decided to delay historical swap reporting until 30 days after SDR reporting is required for the particular swap type and counterparty pair. Second, as discussed further below, the CFTC chose to separate SDR reporting and real-time reporting in the context of the cross-border application of swap requirements. As a result, market participants must now consider each of these three types of reporting separately when determining which requirements must be complied with and by when.

Type of Counterparties

The CFTC’s final swap reporting rules divide transactions into those where at least one counterparty is a swap dealer or MSP, and those where neither counterparty is a swap dealer or MSP, for purposes of determining compliance timing. While transactions between affiliates will generally be subject to reporting requirements, the real-time reporting release includes a limited exception for certain types of inter-affiliate trades.

In June 2012, the CFTC proposed cross-border guidance, and a related proposed exemptive order, that describe the application of swap rules, including reporting rules, to transactions. The CFTC has since adopted a final exemptive order that applies until July 2013, but has not yet adopted final guidance. While the full details of these cross-border releases are beyond the scope of this article, they generally divide counterparties into five groups for purposes of reporting:

     

  • swap dealers and MSPs that are “U.S. persons;”
  • swap dealers and MSPs that are not “U.S. persons,” which are further subdivided into those that do and do not have U.S. person parents with certain regulatory statuses;
  • non-U.S. branches of swap dealers and MSPs that are “U.S. persons;”
  • “U.S. persons” that are not swap dealers or MSPs (i.e., U.S. end-users); and
  • non-“U.S. persons” that are not swap dealers or MSPs (i.e., non-U.S. end-users).

Under the final exemptive order, the extent to which, and the date on which, the three types of reporting apply depends on how the counterparties are categorized and which type of reporting is in question.

Type of Swap

The CFTC’s final swap reporting rules established different reporting dates for CDS and IRS, on one hand, and commodity, equity, foreign exchange or other swaps, on the other, where at least one counterparty is a swap dealer or MSP.

In November 2012, as permitted by the Dodd-Frank Act, Treasury Secretary Timothy Geithner exempted “foreign exchange forwards” and “foreign exchange swaps,” as defined in Dodd-Frank, from the vast majority of Dodd-Frank swaps rules. In the reporting arena, these instruments remain subject to SDR and historical reporting, but are exempt from real-time reporting. Other foreign exchange derivatives, including non-deliverable forwards and foreign exchange options, remain subject to all swap rules, including real-time reporting.

Over the course of the past several months, the CFTC staff has issued a series of no-action letters providing specific relief meant to solve a number of reporting concerns. This includes relief related to bespoke and complex swaps, swaps in emerging market jurisdictions, cleared swaps, and swap reporting that implicates privacy concerns for counterparties in certain non-U.S. jurisdictions. The specific contours of this relief is beyond the scope of this article, but market participants should carefully consider whether any specific relief is applicable to their swap transactions or the reporting of certain data elements.

Finally, though not specific to reporting, the CFTC has announced that it does not intend to bring an enforcement action against a swap dealer or MSP for failing to fully comply with Dodd-Frank swaps requirements before July 12, 2013 if that failure stems from a practical or technical impediment to compliance or uncertainty interpreting Dodd-Frank requirements. The market participant must act reasonably and in good faith to fully comply with the requirement, including demonstrating progress towards compliance, identification of issues as soon as reasonably possible, elevation of issues to senior management and, to the extent necessary, timely consultation with the CFTC and other industry participants. It seems likely that market participants will benefit from such an enforcement posture for some of the highly technical problems currently faced with respect to swap reporting.

 

Summary Chart of Reporting Compliance
Dates as of Feb. 20, 20131
One party is: The other party is: Interest Rate Swaps / Credit Default Swaps “Foreign Exchange Swaps” and “Foreign Exchange Forwards” Other Foreign Exchange Derivatives, Equity Swaps, Commodity Swaps and Other Swaps
A U.S. person that is a swap dealer or MSP2 Any counterparty SDR Reporting: 12/31/12  

Real-Time Reporting: 12/31/12

Historical Swap Reporting: 1/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  3/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: 2/28/13

Historical Swap Reporting:  3/30/13

A non-U.S. branch of U.S. swap dealer or MSP (“Non-U.S. Branch”) A U.S. person (other than another Non-U.S. Branch) SDR Reporting: 12/31/12

Real-Time Reporting: 12/31/12

Historical Swap Reporting:  1/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  3/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: 2/28/13

Historical Swap Reporting:  3/30/13

A non-U.S. person or Non-U.S. Branch SDR Reporting: 12/31/12

Real-Time Reporting: Not currently required under the cross-border exemptive order3

Historical Swap Reporting:  1/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  3/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not currently required under the cross-border exemptive order

Historical Swap Reporting:  3/30/13

A non-U.S. swap dealer or MSP with a U.S. ultimate parent4 A U.S. person (other than a Non-U.S. Branch) SDR Reporting: 12/31/12

Real-Time Reporting: 12/31/12

Historical Swap Reporting:  1/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  3/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: 2/28/13

Historical Swap Reporting:  3/30/13

A non-U.S. person or Non-U.S. Branch SDR Reporting: 12/31/12

Real-Time Reporting: Not currently required under the cross-border exemptive order

Historical Swap Reporting:  1/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  3/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not currently required under the cross-border exemptive order

Historical Swap Reporting:  3/30/13

A non-U.S. swap dealer or MSP without a U.S. ultimate parent A U.S. person SDR Reporting: 12/31/12

Real-Time Reporting: 12/31/12

Historical Swap Reporting:  1/30/13
       
   

SDR Reporting: 2/28/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  3/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: 2/28/13

Historical Swap Reporting:  3/30/13
       
   

A non-U.S. Branch SDR Reporting: 12/31/12

Real-Time Reporting: Not currently required under the cross-border exemptive order

Historical Swap Reporting:  1/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  3/30/13

SDR Reporting: 2/28/13

Real-Time Reporting: Not currently required under the cross-border exemptive order

Historical Swap Reporting:  3/30/13

A non-U.S. person SDR Reporting: Not currently required under the cross-border exemptive order

Real-Time Reporting: Not currently required under the cross-border exemptive order

Historical Swap Reporting: Not currently required under the cross-border exemptive order

SDR Reporting: Not currently required under the cross-border exemptive order

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting: Not currently required under the cross-border exemptive order

SDR Reporting: Not currently required under the cross-border exemptive order

Real-Time Reporting: Not currently required under the cross-border exemptive order

Historical Swap Reporting: Not currently required under the cross-border exemptive order

A U.S. end user A U.S. end user SDR Reporting: 4/10/13

Real-Time Reporting: 4/10/13

Historical Swap Reporting: 4/10/13

SDR Reporting: 4/10/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting: 4/10/13
   

SDR Reporting: 4/10/13

Real-Time Reporting: 4/10/13

Historical Swap Reporting: 4/10/13
   

A non-U.S. end user SDR Reporting: 4/10/13

Real-Time Reporting: 4/10/13

Historical Swap Reporting: 4/10/13

SDR Reporting: 4/10/13

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  4/10/13

SDR Reporting: 4/10/13

Real-Time Reporting: 4/10/13

Historical Swap Reporting:  4/10/13

A non-U.S. end user A non-U.S. end user SDR Reporting: Not required

Real-Time Reporting: Not required

Historical Swap Reporting: Not required

SDR Reporting: Not required

Real-Time Reporting: Not required under the Treasury Exemption

Historical Swap Reporting:  Not required

SDR Reporting: Not required

Real-Time Reporting: Not required

Historical Swap Reporting: Not required

     

  1. This chart is a general summary of applicable reporting deadlines and is not meant as legal advice.  The dates cited are subject to change.  In addition, a number of specific exceptions are not reflected in this chart, including for certain trades between affiliates. 
  2. For the purposes of this chart, we assume that a person that will register as a swap dealer or MSP has registered by Dec. 31, 2012.  A person who registers after such date will be subject to the SDR and real-time reporting requirements applicable to a swap dealer on the earlier of (i) the date they would be required to register and (ii) April 10, 2013.  The same person will be subject to historical swap reporting requirements on the earlier of (i) 30 days after becoming subject to SDR and real-time reporting requirements and (ii) April 10, 2013. 
  3. The cross-border exemptive order expires on July 12, 2013, absent further action by the CFTC. 
  4. Specifically, an ultimate parent that is a U.S. swap dealer, MSP, bank, financial holding company or bank holding company.
Annette L. Nazareth is a partner and Gabriel D. Rosenberg is an associate at Davis Polk in the firm’s financial institutions group.

[The Swap Report] CFTC Letter 13-09: Relief from Reporting Requirements for Intra-Group Swaps (Courtesy of THE SWAP REPORT)


By Andrew Cross and Crystal Travanti OVERVIEW The CFTC recently issued no-action relief from certain swap data reporting requirements for swaps entered into between affiliated counterparties. The relief is conditioned upon several factors, which we have summarized in greater detail…

View the entire entry:
http://www.theswapreport.com/2013/04/articles/dodd-frank-reforms-1/cftc-letter-1309-relief-from-reporting-requirements-for-intragroup-swaps/index.html

OVERVIEW
The CFTC recently issued no-action relief from certain swap data reporting requirements for swaps entered into between affiliated counterparties. The relief is conditioned upon several factors, which we have summarized in greater detail in the table below.
In general, Letter 13-09 grants relief from: historical swap reporting (Part 46); “regular” swap reporting under Part 45 for swaps entered into on or after April 10, 2013; and reporting requirements under the end-user exception (Part 50). The following is a list of the specific regulatory reporting requirements for which Letter 13-09 grants relief:
CFTC Rule 45.3(d)(1) – Primary economic terms data reporting
CFTC Rule 45.3(d)(3) – Confirmation data reporting
CFTC Rule 45.4(c)(1)(ii) – Life cycle event and state data reporting
CFTC Rule 45.4(c)(2)(ii) – Current daily mark valuation reporting
CFTC Rule 45.5 – Unique swap identifier requirements
CFTC Rule 46.3(a) – Reporting of historical swaps in existence on or after 4/25/2011
CFTC Rule 46.3(b) – Reporting of historical swaps expired or terminated prior to 4/25/2011
CFTC Rule 50.50 – Reporting of swaps for which end-user exception central clearing has been claimed
Additionally, it is important to note that the no-action relief granted for swaps that involve wholly-owned subsidiaries differs from the relief granted for swaps that involve majority-owned subsidiaries.
By way of prime example, in the majority-owned subsidiary context, there is a new quarterly reporting requirement, whereby a non-SD/non-MSP reporting counterparty relying on the Letter 13-09 relief must report all swap data to a swap data repository (“SDR”) no later than 30 days following the end of each fiscal quarter. This new quarterly reporting requirement will commence on June 30, 2013.
Under Letter 13-09, the relief is available where the affiliation arises by virtue of either:
1) A parent-subsidiary relationship between the affiliates; or
2) A brother-sister relationship (i.e., common parent relationship) between the affiliates.
In either case, the affiliation can be direct or indirect. Finally, the relief granted in Letter 13-09 does not apply to any swaps for which the affiliated counterparties have elected to claim the inter-affiliate exemption from central clearing pursuant to CFTC Rule 50.52.

The FIX Protocol’s FPL: Meeting The Demands Of Regulation (in ISS magazine)


http://www.iss-mag.com/forward-thinkers/fpl-meeting-the-demands-of-regulation

Daniella Baker, Global Marketing and Communications Manager, FIX Protocol Ltd

 

Over recent years, the European financial markets have witnessed an unprecedented level of new regulation coming down the pipeline.  Whereas previously the region’s trading community was predominantly focused on implementing the initial iteration of MiFID, these same firms today need to understand the implications of multiple emerging regulations, impacting various areas of the trade lifecycle and many different asset classes. 

 

With new regulation being developed at both a supranational level such as MiFID II and EMIR, and at the national level with country specific requirements such as implementation of the Financial Transaction Tax (FTT) in advance of FTT zone legislation, there is much to contend with.  Throw into the mix increased globalisation and regulatory developments elsewhere, the emergence of new regulatory bodies such as the Prudential Regulation Authority – the UK’s new financial regulator, a lack of clarity in terms of what we can expect from certain regulations and the tightening of purse strings (necessitated by the financial crisis) and firms are often finding that they need to manage growing regulatory pressures with increasingly limited resources.  As such, it is unsurprising that meeting regulatory requirements is frequently cited as one of the top concerns facing firms across the industry.

 

FIX Protocol Ltd (FPL) is an industry-driven standards body dedicated to addressing the business and regulatory challenges impacting the trading community through standardisation.  The organisation provides a forum that brings together representatives from different industry sectors, with different viewpoints on issues of common concern.  It then encourages participants to work together, free from commercial interest, to develop solutions that prove beneficial for the wider community.

 

FPL is responsible for developing and promoting the FIX messaging standard that has become embedded in the fabric of our industry, supporting the infrastructure used by thousands of firms every day to complete millions of transactions.  Therefore, being able to leverage this existing investment to meet new regulatory requirements offers market participants the potential to absorb these changes into their business in a cost- and time-efficient manner.  Some examples of FIX usage by regulators include use by ASIC for Short Sale Reporting, IIROC for Transaction Reporting, FINRA for TRACE Reporting, and the CFTC for Large Trader Reporting.  Encouraging an increased understanding of how FIX, and other mass adopted, non-proprietary, free and open standards, could be used to address emerging needs is central to FPL’s work.

 

Fixed income

One of the areas in which market participants are calling for increased use of FIX to meet regulatory developments, is in relation to the many changes taking place in the fixed income world.  Regulatory efforts to increase capital requirements and enhance transparency, in this traditionally voice traded asset class, have led to the development of an increasingly fragmented marketplace.  As broker dealers started to reduce their inventory, institutional traders found that they needed to look to the broader market to source liquidity and for price discovery.  This accelerated the need for an increasingly automated and venue-driven trading environment.

 

In mid-2011, as a proliferation of new trading venues was expected, FPL was approached by representatives from the broker dealer community keen to work with the organisation to encourage both existing and new venues to offer FIX connectivity.  Using FIX presented the possibility of being able to connect to these platforms in a cost effective manner and achieve greater transaction efficiencies than might otherwise be possible.

 

Working closely with this group, in 2012 FPL produced recommended guidelines for how FIX could be used by emerging Swap Execution Facilities (SEFs) to trade interest rate swaps (IRS) and credit default swaps (CDS).  These guidelines are now being used to support FIX implementations by a number of SEFs and are expected to also be adopted by OTFs once details around these are finalised within MiFID II.  This was recently followed with best practice recommendations published in February 2013 and further enhancements to the protocol, created to support the trading of cash bonds using FIX.  Further phases of this work, some of which are already underway, include additional support for cash bond trading and related functions such as the exchange of trading limits and entitlement information.

 

OTC derivatives reporting

The OTC derivatives space is currently also undergoing significant change, many of these developments are impacting FPL’s member firms, a considerable number of which currently trade OTC derivatives using FIX and are keen to leverage their investment and use FIX for reporting purposes also.  FIX supports OTC derivatives trading through to allocations and clearing, however the organisation is currently in the process of including additional functionality to support recent regulatory developments.

 

Achieving consolidation in a disparate world

One of the major impacts of MiFID was the creation of a more fragmented market structure and whilst this achieved increased competition, key challenges presently facing the industry relate to how we actually bring information regarding market activity back together again.  A prime example of this is the need to be able to manage and consolidate trading data across multiple trading venues.  This consolidated view would enable the generation of common trade-measurement benchmarks and similar metrics.

 

In mid-2011, FPL formed a group to explore how standards could be applied to help address this challenge and in November 2012, released recommended guidelines for the consolidation of trade reports and market data for European equity markets.  These recommendations make it much easier to identify where a trade was issued and in which currency, where the trade was executed and the time of execution, in addition to providing further information.  

 

The LEI

As FPL seeks to support the needs of a global membership base, it is involved in encouraging consistency and the promotion of standards in the development of regulation in multiple markets.  One initiative that transcends interest across many jurisdictions is the Legal Entity Identifier (LEI), which is likely to impact many FPL member firms as they are required to integrate the LEI into their business processes.

 

In addition to ensuring that FIX is able to support the LEI, FPL also participates in various LEI working groups that have been formed by the Financial Stability Board (FSB).  These groups are responsible for exploring how the LEI should be implemented and how it could work in practice.  FPL is keen to encourage the development of a federated and open standards-based approach to the creation and publication of the identifiers themselves, as it feels this would best address industry needs.

 

Where next

These are just some of the many ways in which FPL is seeking to support the trading community as it aims to meet the demands of continued waves of regulation facing our industry.  There are many further initiatives planned for 2013 some of which build on those already mentioned and others explore different areas, all presenting many opportunities for market participants to get involved. A prime example of this emerged just last week as FPL announced the formation of a new pre-trade working group, part of this group’s remit will be to explore regulatory impact in this space.  As regulatory audits of trade advertised volume has recently been on the rise and it is felt that additional FIX values may be able to assist in helping the brokerage community to accurately categorise their advertisements and avoid further penalties. 

 

There are many ways that increased standardisation could benefit our markets and FPL is keen to ensure these advantages can be realised. For more information please visit www.fixprotocol.org

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