Negotiations between US and European regulators on how best to utilise swap reporting data should begin immediately, commissioner Scott O’Malia of the Commodity Futures Trading Commission (CFTC) has said.
Speaking before yesterday’s meeting of the US derivatives regulator’s influential Global Markets Advisory Committee, he said not enough was being done to harmonise reporting and share data to fully understand systemic risks in the global swaps market.
“Right now, the US and European Union are working separately to resolve data quality issues that should instead be resolved together,” he told the committee. “And, so far we are not taking the necessary steps to set the groundwork for an agreement that would allow our jurisdictions to share this swaps data.”
O’Malia believes that harmonising efforts to collect and analyse OTC derivatives data between the US and EU will provide regulators on both sides of the Atlantic with high-quality, low-cost data to enable them to have full oversight of the swaps market.
He added: “In light of the discussion today, I am reminded of the ‘Path Forward’ document dated July 11, 2013. I believe we need to return to the spirit of cooperation embodied in that document before we undertake new and potentially confusing exempt regulatory constructs.”
O’Malia was referring to steps to develop new exemptions for non-US central counterparties that do not wish to register as derivatives clearing organisations. He wants the CFTC to change its focus to ensure rules between different jurisdictions are more closely aligned to enable substituted compliance or equivalence, rather than needed to develop complex exemptions, highlighting the case of how US swap execution facilities (SEFs) and European multilateral trading facilities (MTF) are treated differently.
“In comparing a SEF, qualified multilateral trading facility (QMTF), or possibly an exempt SEF proposal, it is not clear how any of these will provide a solution that is superior to mutual recognition of existing SEF and MTF market structures in the US and Europe.”