On 14 March, FIA submitted a response to the European Commission’s fitness check on supervisory reporting. The aim of this consultation is to assess whether supervisory reporting frameworks in place prior to December 2016 are fit for purpose. The European Commission also seeks to quantify the cost of complying with such reporting requirements and identify possible ways to simplify and streamline these regimes.
FIA’s response focused predominantly on the reporting of Exchange Traded Derivatives (ETDs). As a result, FIA made the following recommendations:
- Simplify the reporting of ETDs: switch to single-sided position reporting for EMIR ETD reporting, with the CCP reporting the transaction between the CCP and the clearing member using a single data set and the clearing member reporting the transaction between the clearing member and its client, using a single data set. Adopting a position, as opposed to a transaction reporting regime will more accurately reflect the nature of ETDs, which are standardised contracts which are ‘compressed’ into a net position at the end of each day. A position reporting regime would also provide a more accurate representation of ETD lifecycle events and margin/collateral changes given that these take place at position level and cannot be reported at transaction level;
- Adopt a ‘report once’ framework: instead of submitting separate reports under multiple reporting regimes, it is preferable to adopt a ‘report once’ framework which uses a single reportable dataset per transaction to serve multiple regulatory purposes (e.g. monitoring systemic risk as well as market abuse surveillance). Regulators could then extract the specific data points they require to meet the particular regulatory mandate. This would significantly reduce the compliance costs associated with supervisory reporting and eliminate inconsistencies in the interpretation of common fields (e.g. price), whilst streamlining the management of reporting and its processing;
- Remove the requirement to report the underlying static data: where a legal entity or instrument identifier, such as an LEI or ISIN, is required to be reported there should be no requirement to also report the static data that sits beneath the primary identifier. This is a duplicative requirement since regulatory authorities already have access to the necessary data via the Global Legal Entity Identifier Foundation (GLEIF) database or Financial Instrument Reference Data System (FIRDS); and
- Collaborate on the development of a common financial language: encourage key jurisdictions to collaborate with the aim of obtaining a critical mass to support a global take up of a common financial language.