Swap Industry Regulations: October 12 Deadlines Have Passed– Are Your Systems Ready?

November 27, 2012

In the wake of the 2007-2008 financial crises, the G-20 summit in Pittsburgh made a commitment in 2009 that:

“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.”

Since then regulators around the world have been drafting rules to adhere to the G-20 commitment in their respective jurisdictions, most notably, the European Market Infrastructure Regulations (EMIR) in Europe and the Dodd Frank Act in the United States.

A major set of deadlines for the swaps industry passed on October 12 and more are on the way.  As the deadlines near, buy-side firms are preparing to support regulatory changes around the OTC derivatives market.  These preparations involve many areas of the organization, including operations and their associated systems. 

The first wave of new requirements revolves around swap data reporting.  In order to comply, asset managers will need to first identify reporting duties and reportable asset classes based on the requirements and compliance dates put out in the regulation and clearly understand reporting obligations based on the firm’s swap activities.  Once the reporting obligations have been established, firms will need to ensure operations are capturing all of the data fields necessary for reporting. 

 To prepare, asset management firms should be looking to answer the following questions:

  • Do you understand the contents and timing of the regulations and how they affect your organization?
  • Are your systems ready to handle the changes?
  • Are upgrades and enhancements needed to any of the systems in order to comply?
  • Are your vendors providing guidance on the regulations and how their systems can capture and report on data to meet the requirements?

Disclosure and transparency are key components of the new reporting requirements.  To address this, firms need flexible systems in place that can capture both data that is already being tracked and provide the ability to add and capture new data as the requirements demand.  Because the details around the regulation requirements have been coming out slowly and are still being defined, it has been difficult for vendors to make the necessary changes to allow their clients to be fully compliant. 

 At PORTIA, we have been monitoring these regulations to ensure our clients are ready and in compliance consistent with the 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 have provided the first in a series of comprehensive reports detailing how PORTIA meets the accounting and reporting challenges presented by these regulations. (Current PORTIA clients can click here to access the report via the PORTIA Service Centre Portal).

As the regulations continue to evolve and political events re-shape these requirements, PORTIA is actively following developments and will continue to provide guidance on the requirements and 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.

–  Denise Ornell, Director of Product Development

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