Datas: what are the regulatory challenges for companies?

by bold-lichterman

The opinion of Sébastien Charvet, sales manager at Altares, an expert company in data and big data:

FM Regulatory data, a major issue for the Regulator, a considerable challenge for Market Actors!

AAEAAQAAAAAAAAJLAAAAJDdjZTRlODIyLTQyY2YtNDZlNy05OTUwLTQ5NTFhM2FiZjlhMAData is more than ever at the heart of regulators’ concerns, at the center of many initiatives launched since 2008 covering both the banking world (BIS, IMF, FSB, EBA) and the markets (IOSCO, ESMA). The stakes are high since it is, on a consolidated basis, to strengthen the macro-prudential surveillance system. Despite the efforts made (data gaps, EMIR reporting), major gaps remain at several levels: quality, access and aggregation capacities, standardization and traceability. Like the LEI, constituting a major advance in legal, technical and political terms, a global solution is possible.

Indeed, we note that the LEI has entered a critical phase of its development. The use cases are becoming clearer and multiplying to meet the needs of regulators as part of their market surveillance and systemic risk missions. Mandatory since 2013 in the reporting of derivative transactions under EMIR, the LEI is now binding:

• Any declaration in which the LEI of the counterparty and that of the beneficial owner is not filled in, does not comply or has expired, will be systematically rejected by the Trade Repository (TR) from October 15, 2015. The competent national authorities have the power to ” impose penalties and financial sanctions (The FCA applies a fine of 1.5 GBP for each mandatory data not filled in or deemed non-compliant).

• The new MiFIR Regulation, the entry into force of which is scheduled for January 2017, extends the scope of reporting to all financial instruments including shares, certificates, funds, bonds (sovereign and corporate), derivatives, structured products and raw materials. According to the provisions, any counterparty to a transaction must declare its LEI and that of its client at the time of execution on a regulated market or an approved platform (MTF, OTF, IS), including when the latter resides outside the EU.

If this increase in load translates into a growth of LEIs at the global level (400,000 registrations recorded) and testifies to the confidence of the regulators in the GLEIS, it creates in the short term disruptions for the users, who very often experience difficulties to ‘match’ their internal repositories with the Global LOU Database, and thus ensure the mandatory quality of the LEIs that they transmit to the Authorities (valid LEIs, issued by an approved LOU).

In any event, the costs and operational risks of all these matching operations are considerable, and the final quality of the data is often deficient. It is also probable that this situation will only become even more complex with the arrival of new data relating to inter-entity links scheduled for 2016.