As we advised in our recent LinkedIn post, the Monetary Authority of Singapore (MAS) issued a Consultation Paper (CP) relating to a proposed re-write of its trade reporting rules, earlier this month. The CP seeks comments from the market on the adoption of many of the proposals that will also form the new CFTC and EMIR rules. The comment period ends on September 3, 2021.
Quorsus’ Regulatory Reporting Practice has reviewed the CP and below we articulate our thoughts on some of the more significant points and the questions they raise.
In summary, MAS seeks to embrace CPMI-IOSCO’s Technical Guidance for UTI, CDE, UPI and its proposed rules generally align with those of the CFTC, ESMA and other jurisdictions, including use of ISO 20022.
Unique Transaction Identifier (UTI)
MAS recognises that determining which party is responsible for generating the UTI will become problematic in certain situations, especially cross-border transactions. It seeks to follow the CPMI-ISOSCO industry waterfall, but there may be challenges, especially where the UTI generator has a reporting deadline later than that of the reporting party, or in any situation where the reporting entity is unable to obtain the UTI within the reporting deadline. There is also recognition of the challenges of the different reporting obligations of different CCPs globally.
A solution is proposed: an ‘interim UTI’, which would be used for the submission of the initial report but replaced with the correct UTI, once known (but no later than 2 business days after obtaining the UTI). ‘Interim’ data elements are always a little clunky, and it begs a number of questions: how will TRs cope with firms potentially updating a key element (there is no suggestion that the trade should be exited and rebooked)? Not only the TRs, but the reporting entities themselves will have processes, controls and reconciliations in place to manage UTIs. Which Action / Event combinations should be used?
Critical Data Elements (CDE)
It is good to see that MAS is largely adopting CDE and, as with ESMA & CFTC, challenges are likely to lie where their approach differs to that of other regulators, as the guidelines don’t prevent supervisors customising where they see fit. Also, MAS acknowledges that some CDEs are not yet finalised (e.g. custom basket fields). MAS also notes that in these cases, it will ‘defer reporting until available.’ This implicitly suggests a subsequent phase after the implementation of the new rules, adding to the workload for reporting firms.
Unique Product Identifier (UPI)
As with most regimes, MAS will support UPI when it is endorsed by the global regulatory community (expected in July 2022.) In the meantime, MAS requires firms to follow existing reporting rules for product attributes. Subsequent migration to UPI will require another phase of reporting, and MAS recognises a transition period will be required. In its CP, firms are asked whether they support this approach and how long the transition period should last. The challenges Quorsus foresees with this approach is another phase of back reporting and a need for firms to consider how to build a process for capturing the correct UPI. Furthermore, TRs may need controls in place with regard to UPI validation.
MAS requests feedback on the pros and cons of switching to reporting FX Swaps as a single contract. It provides a choice: keep to two trades and use a link field to combine the two legs or booking as a single trade with the use of the (new) Forward FX Rate field. It would seem that a single trade would be cleaner and better reflect the transaction as a whole, but inconsistent jurisdictional booking approaches impact the goal of a single UTI for each trade. Global standards for how to represent trades need to be implemented if supervisors are going to achieve one of the FSB’s objectives of global aggregation.
MAS suggests 12 months from finalising the rules (Q2 2022) to implementation (Q2 2023).
This raises some challenges. The target date is likely to clash with expected EMIR timelines and we expect most jurisdictions around the world to implement changes around the same time.
Is 12 months long enough? ESMA and CFTC both plan longer windows. Do firms have the capacity, considering how cluttered the regulatory reporting landscape is becoming? Most regimes will require subsequent phases – including backporting deadlines, UPI implementation, transitions to ISO 20022. This means firms must plan very carefully for the changes ahead.
At Quorsus, our regulatory reporting experts are able to help you understand and prepare for the challenges the global changes raise. Do contact us, if you would like to know more.