The criticality of reporting financial transactions to regulators cannot be understated. Without the timely and accurate delivery of data it would be impossible for policy makers to support market stability and integrity. As markets expand and new trading strategies emerge, regulators must retain visibility over market activities to facilitate the early identification of vulnerabilities and enforce the adoption of regulations to mitigate potential crises.
Figure 1: The combination of an increasing volume and cross-jurisdictional scope of regulations, data challenges, resource constraints, regulatory uncertainty, and strict deadlines makes conforming to new regulations a significant and complex undertaking for any organisation.
This backdrop was the inspiration for the Digital Regulatory Reporting module (DRR), an extension to the CDM that utilises its standardised definitions to generate unambiguous transactional report data. This now supports multiple jurisdictions and is in production at several major institutions who have already experienced cost benefits from implementing an open market standard.
With new regulations and amendments proposed for the UK, US, EU, Japan, Hong Kong and Canada, there are demonstrable benefits to the regulatory authorities if participants in these markets adopt a common standard for data reporting. Using Securities Finance Transaction Reporting (SFTR) as an example, which was mandated prior to the inception of CDM and DRR, we can see that reporting regimes that do not promote standard generation techniques can, and still do, suffer from inconsistent, malformed and mismatched data. Clearly migration to DRR and the CDM for new and existing reporting offers significant benefits to the entire market.
At a technical level, the CDM utilises the JSON (Java Script Object Notation) format to represent financial objects, which has now been adopted as a transaction data reporting format after a recent review of regulatory technical standards by ESMA (European Securities and Markets Authority).
In summary, the ISDA DRR initiative, which has the CDM at its core, has proven that standardisation can generate better quality data, the benefits of which can be leveraged to deliver more accurate transactional reporting to satisfy regulations from multiple jurisdictions. With an SFTR rewrite pending, as well as new reporting rules for SEC 10c-1a, the CDM is perfectly positioned to deliver high quality data in a time critical manner.
This article is an excerpt from our ‘CDM: The Road to Adoption’ report – click here to read the full report.
