Synapse

There is No Such Thing as Harmonization

As regulatory bodies have unleashed a flurry of new rules to enhance greater trade and transaction reporting transparency and mitigate systemic risk, the industry has sought to improve reporting efficiency with data standards. But with each regulation bringing new complexities (and more requirements right around the corner), the goal of industry-wide harmonization may just be impractical.

Initially, firms across the industry assumed that through the introduction of trade repositories (TRs), they could remove a major step from the data reporting demands of regulatory bodies (i.e., ESMA, SEC, ACER, HKMA, ASIC, CSA/ACVM, etc.). That is, have the TRs translate their data into the regulator’s desired format which can vary depending on the regulatory body.

The reality is, the regulators are pushing their individual data reporting requirements upstream to data submitters, offsetting the benefits of TRs. The responsibility now lies on organizations, including data submitters, custodians, middleware providers and repositories, to improve how data is translated.

This is no simple task.

For starters, the sheer depth and breadth of evolving and updated regulations, including the upcoming Markets in Financial Instruments Directive (MiFID) II regulation, is difficult to keep up with, not to mention tracking  the variety of data formatting standards (e.g., XML/20022, FpML, FIXML, etc.) each regulator requires for data exchange.

Further, the required data must be submitted to multiple TRs that may have different interpretations of the data fields. That means the submitted data could actually mean the same thing but could differ across those TRs, regulators and other delegated reporting entities because of their own specific preferences for data and data fields.

It’s clear that data messaging, translation and exchange entail much more time and effort before industry-wide standards are developed. And with unaligned political motivations holding back regulatory bodies from intervening, can you imagine a scenario where data harmonization gets easier anytime soon?

Download our full-length paper, There is No Such Thing as Harmonization; So Let’s Get Good at Translation, for a complete look at what firms need to focus on to improve  their data translation  to remain compliant and keep costs low as more regulatory demands unfold.

Authors

Randall Orbon – Senior Vice President
Randall Orbon is part of the Sapient Global Markets leadership team. Randall defines strategy, drives business development and executes key components of the strategy. He has worked with numerous capital and commodity market participants to develop and execute transformative strategies. Randall holds a BSE in Computer Science from the University of Pennsylvania and an MBA from Columbia and London Business Schools.

Mahima Gupta – Senior Manager
Mahima Gupta is a Senior Manager with the Solutions team at Sapient Global Markets. She is involved in the product management of multiple solutions, including CMRS. She has over 12 years of experience in traded risk management, regulatory reporting and business consulting in the global capital markets. She is currently based out of Gurgaon and is focused on various regulatory change initiatives unraveling in the US, Europe and APAC.

Brian Lynn – Chief Technology Officer of Global Electronic Markets, Inc (GEM).
Brian Lynn is Chief Technology Officer of Global Electronic Markets, Inc (GEM). GEM is a leading advisory service specializing in electronic standards for OTC derivatives. GEM advises many key participants in the industry, including on technology strategy and architecture, consults on standards development, and provides training and mentoring. Brian currently chairs the ISDA FpML working group responsible for addressing global regulatory reporting initiatives such as Dodd- Frank, EMIR, and MIFIR.