UPDATE: Regulators Look To Scrutinize Swaps Data
25 August 2011 - 1:48AM
Dow Jones News
A group of regulators said Wednesday it wants to beef up
surveillance of the $600 trillion swaps market via improved
record-keeping and the reporting of additional information to data
warehouses.
The Committee on Payment and Settlement Systems and a working
group of the International Organization of Securities Commissions
released their proposals in response to Financial Stability Board
recommendations last October.
The FSB urged supervisors to consult with relevant market
authorities to ensure a minimum level of transaction-level data is
regularly made available to regulators and is aggregated for
regulatory--and ultimately public--dissemination, while meeting
confidentiality requirements.
The CPSS and Iosco technical committee set out in a report how
they would achieve the timely collection, storage and distribution
of data on swaps, or privately traded over-the-counter
derivatives.
Regulators believe such trade repositories will help them crack
down on market abuses and improve transparency in the market, which
was widely blamed for deepening the financial crisis.
"The lack of adequate information on OTC derivatives exposures
is widely seen as having exacerbated a number of corporate distress
situations in the recent crisis, including the demise of Lehman
Brothers [Holdings Inc.] (LEHMQ) and the near-default of AIG
[American International Group Inc.] (AIG) and Bear Stearns [Cos.],"
the report said.
In September 2009, the Group of 20 large industrialized and
developing nations committed to seeing swaps reported to data
warehouses.
The CPSS and Iosco report highlights certain areas where they
believe current trade repository practice is insufficient, and
discusses ways to make sure the information that isn't currently
being supported is added to the system. That desired information
includes data on netting arrangements between counterparties on
bilateral swaps, market values of open positions, time stamps for
trades and collateral agreements.
The report also recommends a system of unique legal entity tags,
identifying parties to swap transactions, and an international
classification system for identifying different types of OTC
derivatives and their attributes.
"At a minimum, the notional value of each contract along with
the product classification would be required," the report said.
Under new global regulations, swaps that are more exotic and
that aren't eligible for central processing or traded regularly
will be subject to higher capital charges.
The public is invited to comment on the CPSS and Iosco report
through Sept. 23, after which the groups will work on a final set
of recommendations by year end.
-By Katy Burne, Dow Jones Newswires; Katy.Burne@dowjones.com
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