Swap Data Reporting – Nearing the 2012 Deadline

September 13, 2012

It has been over two years since Dodd-Frank was signed into federal law by President Obama on July 21, 2010.  A few months later, on September 15, 2010, the European Commission published its final proposal for the European Markets Infrastructure Regulation (EMIR).  Both of these regulations aim to provide additional stability and transparency into the global financial systems in order to avoid the mistakes made during the financial crisis between 2007 and 2010.  Since being enacted, much work has gone into and continues around defining and implementing the rules as they relate to the various laws.

A lot has been said about the effect these laws and regulations will have on the investment management  industry, not only in their restrictions in trying to correct the structural inefficiencies in the  market that contributed to the recent economic collapse but also on the technological infrastructure imbedded within financial services organizations.  Strict policies and procedures will need to be implemented and most systems require updating and enhancements to account for and report on how investment management organizations are adhering to the regulations.

An example how these changes will affect both the policies and systems can be seen in the commitment made at the 2009 G-20 summit in Pittsburgh:

“All standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest. OTC derivative contracts should be reported to trade repositories.”

Ever since this statement by the G-20, regulators around the world have been drafting rules to adhere to the commitment in their respective jurisdictions, most notably the EMIR in Europe and the Dodd-Frank Act in the United States. Under the mandate of the Dodd-Frank Act, both the Security and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have issued rules for swap data reporting, “to increase transparency and integrity in the derivatives markets… regulations will require information about every swap or security-based swap (SBS) transaction to be sent to new swap data repositories or a government agency” (click here to read the Price Waterhouse detailed description of the rules).

The swap data reporting requirement governs many types of swaps, including interest rate swaps, currency swaps and credit-default swaps (CDS). To date, the CFTC and the SEC have independently proposed over three dozen data fields that will be required to account for swaps properly and for an organization to adhere to the rules these fields will need to be available in a firm’s investment accounting system in order for them to be compliant by the 2012 deadline noted by the G-20.

At PORTIA, we have been monitoring these regulations to ensure our clients are ready and in compliance consistent with these deadlines.  Since PORTIA is built on an open architecture and provides the highest level of data management and reporting flexibility in the industry, our clients can identify, label, record and report on all of the fields required by these regulations, allowing them to meet the challenges of Dodd-Frank and EMIR without any code changes or system upgrades.  To help our clients prepare for compliance with the upcoming regulations, we are providing a comprehensive report detailing how PORTIA meets the accounting and reporting challenges presented by these acts and helps clients walk through the process ensuring compliance.

As the regulations continue to evolve and political events re-shape these requirements, PORTIA is actively following developments and will continue to provide updates on how to implement changes to ensure compliance.  With markets being more volatile and heavily regulated than ever before, we believe it’s important that you are prepared for changes and can react quickly with minimal disruptions to both your operations and your clients.

– Bethani Hipsh, Product Manager

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