Since the beginning of 2013, the CFTC has required certain market participants to report their interest rate and credit index swap trades to a swap data repository, or SDR. CFTC Commissioner Scott D. O’Malia recently outlined problems with this effort. According to Mr. Omalia:
- The data submitted to SDRs and, in turn, to the CFTC is not usable in its current form. The problem is so bad that CFTC staff have indicated that they currently cannot find the London Whale in the current data files.
- In a rush to promulgate the reporting rules, the Commission failed to specify the data format reporting parties must use when sending their swaps to SDRs. In other words, the Commission told the industry what information to report, but didn’t specify which language to use. This has become a serious problem. As it turned out, each reporting party has its own internal nomenclature that is used to compile its swap data.
- The end result is that even when market participants submit the correct data to SDRs, the language received from each reporting party is different. In addition, data is being recorded inconsistently from one dealer to another. It means that for each category of swap identified by the 70+ reporting swap dealers, those swaps will be reported in 70+ different data formats because each swap dealer has its own proprietary data format it uses in its internal systems. Now multiply that number by the number of different fields the rules require market participants to report.
- Aside from the need to receive more uniform data, the Commission must significantly improve its own IT capability. The Commission now receives data on thousands of swaps each day. So far, however, none of our computer programs load this data without crashing. This would seem odd with such a seemingly small number of trades. The problem is that for each swap, the reporting rules require over one thousand data fields of information. This would be bad enough if we actually needed all of this data. We don’t. Many of the data fields we currently receive are not even populated.
- Until this is fixed, nobody should be under the illusion that promulgation of the reporting rules will enhance the Commission’s surveillance capabilities.
I guess we can write all the laws we want but can’t make computers work.