On October 19, 2016, CFTC Chairman Timothy Massad gave the keynote address at the Futures Industry Association (FIA) Futures and Options Expo. He provided an update on the CFTC’s progress in five key areas, including data reporting.
Chairman Massad’s remarks on reporting in particular caught our eye as they suggest the agency is considering a proposal that would give swap data repositories (SDRs) greater ability to take remedial action to ensure that the data received from reporting entities conforms to CFTC standards.
[w]e will soon consider a proposal to change our rules to give swap data repositories (SDRs) greater ability to make sure the data they receive is complete and conforms to required standards. – CFTC Chairman Timothy Massad
To recap, and as firms that have been a “reporting party” or “reporting counterparty” under CFTC Part 43 and Part 45 reporting rules are aware, the swap data reporting process was initially fraught with challenges. Massad’s remarks summarize the actions the CFTC has taken to improve and make consistent the data it receives, and to clarify the reporting obligations of swap market participants. This includes clarifying the reporting process for cleared swaps to eliminate duplicative records, and simplifying cleared swap valuation reporting by removing the requirement that swap dealers report daily valuation data. That obligation now lies with the designated clearing organization. The CFTC is also working on standardizing data elements, domestically and internationally, and on facilitating data sharing with international regulators. These steps improve data utility for regulators and the industry globally.
Notably Chairman Massad also remarked that the agency “will soon consider a proposal to change [its] rules to give swap data repositories greater ability to make sure the data they receive is complete and conforms to required standards. In that way, the data will be of higher quality when it arrives at the CFTC.” Whether this means SDRs will have broader enforcement authority remains to be seen. Reporting entities for the purposes of Parts 43 and 45 should keep an eye on this proposal when released, as it may have implications for their SDR relationships. Chairman Massad also reiterated that the agency is serious about ensuring compliance with reporting obligations, illustrated by the CFTC’s recent enforcement action – including seeking the appointment of a monitor – against a large dealer for a failure to consistently meet reporting obligations. Firms should also ensure that their Large Trader Reports are correct. The underlying takeaway for swap market participants continues to be that the CFTC wants accurate swap data, and will pursue enforcement action if appropriate.