Right now, the attention of most is on getting OTC derivative related data to the trade repository, aligning to ASIC’s new rule set going live on 21 October 2024. For a lot of firms, this effort will run right up to the deadline date as market participants seek to test with their trade repositories and achieve reduced levels of rejections, which, as we understand it, are still running high for most performing testing at this stage.
As trade repositories make the technical switch-over across the weekend of the 21 October, market participants will likely have an immediate period of “clean-up” effort to correct the inevitable data issues which pop up when moving from a testing to production phase.
ASIC have posted their technical guidance collateral on 20 September 2024 which will be a welcome steer as firms look to make final tweaks to data sets and delivery of same over the coming weeks. As part of this update, ASIC have also announced they “will take a measured approach to compliance until March 2025 for reporting entities that make reasonable efforts to comply with the 2024 Rules”, coupled with the warning “if ASIC identifies deliberate or systemic breaches, or a failure to make all reasonable endeavours to come into compliance, we will take regulatory action”. This mirrors the approach taken in Europe with the 180 day “grace” period offered by ESMA.
While the main focus right now is naturally on delivery of data to trade repositories, market participants will need to bear in mind their obligation to be in a position to prove their compliance with the new rules. This obligation does come into effect from 21 October 2024 and should start to be given proper consideration if not done so to date.
In addition to the technical guidance posted by ASIC in September, the regulator has also confirmed its stance on the form in which oversight must take. The information published within the updated Regulatory Guide 251 makes clear that oversight must be owned by the reporting entity in full;
“A reporting entity that appoints another person to report on its behalf is required to have an appropriate governance framework and systems, processes and controls designed to ensure that the information reported (under Rule 2.2.1(1)) and any change to that information is and remains at all times complete, accurate and current.”
The guidance document elaborates further on the form of oversight to be undertaken:
- Monthly data reconciliation
- Regardless of whether the reporting entity self-reports to the trade repository or delegates this to another party.
- The frequency should be more frequent than monthly for larger firms or firms which, due to the nature of risk associated with their level of OTC derivative trade could result in a significant impact should data not be reported correctly.
- Increased reconciliation efforts during periods of change
- During change periods relating to new systems, processes or controls reporting entities must increase the frequency and form of reconciliations.
- Golden Source Data
- The reconciliation should compare trade repository data against source / book of record data and not use data gathered from delegates or chain of delegates.
- Delegates written appointment to outline the approach to reconciliations to ensure a reporting entity’s reporting obligations are met.
- Third Party Data Governance
- In instances where source / book of record data can come from many third parties, the reporting entity must provide proper oversight on all sources.
- Clear delegation arrangements and workflows in place to ensure the accuracy, timeliness and completeness of reporting (including in relation to reconciliations and checks).
- Plans for remediation of any reporting errors and omissions.
The guidance section closes by stating the outcome which ASIC is looking for “is for systems, processes and controls to be designed to minimise reporting breaches and, where breaches occur, for issues and fixes to be promptly identified and deployed.”
Given ASIC’s clear direction on expectations regarding oversight, firms should now be considering the steps to be taken to satisfy the regulatory requirements in this area.
