ISDA’s Commitment on Data Reporting

July 8, 2024

By the end of this year, six jurisdictions will have amended their derivatives regulatory reporting rules, with more to follow in 2025. Each set of rules needs to be interpreted and then implemented - a huge amount of work for each individual firm to do on its own. That's why ISDA has pledged to support 11 reporting rule sets in nine major jurisdictions through our Digital Regulatory Reporting (DRR) initiative, and to maintain the DRR as those rules evolve in future, bringing lower costs and greater accuracy to the reporting process.

Our commitment covers the US under Commodity Futures Trading Commission (CFTC) rules, the EU under the European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Regulation (MIFIR), the UK under UK EMIR and UK MIFIR, Japan, Australia, Singapore, Hong Kong, Canada and Switzerland. For those rules yet to come into effect, and for any future amendments, we pledge to make the DRR available well in advance of the go-live dates, giving firms plenty of time to test and incorporate the code into their reporting processes.

This commitment is the latest step in ISDA's journey on derivatives reporting. It's been just over two months since the introduction of amended reporting rules under EMIR Refit in the EU, when DRR users were able to report with close to complete accuracy. For those firms that implemented the rules without the benefit of the ISDA DRR, the proportion of successfully submitted reports in the first week was roughly 75%, according to the Depository Trust and Clearing Corporation, putting those entities at greater risk of regulatory penalties for incorrect reporting. Two months later, the success rate had climbed to 96%.

By using the ISDA DRR, firms not only reduce implementation and maintenance costs, but they also mitigate non-compliance risk. For each new rule set, the DRR takes as its foundation a common interpretation of the requirements that has been reviewed and agreed by an industry working group. It uses the Common Domain Model - an open-source data standard for financial products, trades and lifecycle events - to convert the industry interpretation into free, machine-executable code. That code can be used as the basis for implementing the rules or to validate that a firm's interpretation is aligned with the industry reading. Vendors can also implement the ISDA DRR as part of their reporting solution and make it available to their customers.

We've come a long way since the ISDA DRR was first made available in November 2022, ahead of an initial set of rule changes from the CFTC, which came into effect on December 5, 2022. We worked with market participants to adapt the code for the Japanese and EU rules, both of which came into effect in April, and the DRR is now available for testing for updated UK, Australia and Singapore requirements, which are due to be implemented later this year.

We are already looking ahead to 2025, when Canada and Hong Kong are due to roll out their revisions, and the ISDA DRR for those jurisdictions will be available well in advance of the relevant deadlines.

But our commitment to regulatory reporting extends well beyond initial implementation. The DRR will be updated as rules are further modified in the future, avoiding the need for firms to reassemble teams to refine their systems for every change. For example, the ISDA DRR for the CFTC reporting rules will be amended to reflect additional changes proposed by the commission. Any modifications will be implemented seamlessly for those firms using the DRR for CFTC reporting.

We've made great progress on regulatory reporting, and our DRR commitment means firms will be able to efficiently and cost effectively comply with reporting rules in all nine jurisdictions, enabling resources to be reassigned to other projects. It also ensures increased accuracy, reducing the potential for regulatory penalties due to incomplete or misreported data and delivering the transparency policymakers have long been seeking to achieve. That seems like a win-win to us.

To find out more, visit the ISDA DRR InfoHub or contact [email protected].