APAC Derivative Reporting ReWrites: An Overview

APAC Derivative Reporting ReWrites: An Overview image

The year ahead promises to be a busy one for firms caught under OTC derivatives reporting regimes in APAC. Here’s a quick overview of some key dates and some of the more substantive changes that are being introduced by regulators in Japan, Australia, Singapore and Hong Kong.

  JFSA (Japan) ASIC (Australia) MAS (Singapore) HKMA (Hong Kong)
Timeline / Go-live date 1 April 2024 21 October 2024 21 October 2024 Q3 2025
NEW ISO 20022 XML format Expected to align
Unique Product Identifier Field (UPI) Only required from 7 April 2025 Expected to align
Valuation Reporting Fields NEW In Situ In Situ Expected to align
Margin Reporting Fields NEW Increases substantially NEW Expected to align
NEW Action Type(s) & Event Type(s) Expected to align
NEW Repeatable Date and Payment schedules Expected to align

The impact of some of these changes are significant and very nearly on par as when dealing with a brand new reporting regime. So why now? How will this impact firms and what else do firms need to consider beyond what’s obvious?

Global harmonisation

When OTC derivatives transaction reporting was first introduced, each region established their own form of reporting structure and format. Although there was a common purpose to monitor systemic risk in financial markets, each region did so in an independent fashion. This was particularly evident when one looked at each regime’s reporting template.

Admittedly, designing an all-encompassing report template can be highly complex. Not a simple task, given the variety of data points that may or may not be relevant given the type of derivative and differing underlying asset(s) it can reference.

The overhaul(s) that are taking place aims to reform existing reporting regimes towards global harmonisation to crucially, lead to higher quality data for regulators to monitor and act upon. The ReWrites do this by incorporating many of the Critical Data Elements from the Technical Guidance on the Harmonisation of Critical Data Elements issued by the Regulatory Oversight Committee (ROC).

A global cause but unitary implementation

Say the words ‘global harmonisation’ uttered in the context of regulatory reporting and one would be hard pressed to receive objections of any kind from market participants. Everyone is onboard with this collective goal but at the risk of stating the obvious, accomplishing it remains a unitary effort.

Each affected entity must make their own individual evaluations to ensure that they are able to meet the revised reporting obligations within its respective regime.

The table shown above is by no means exhaustive but aims to highlight the multi-faceted nature of these changes. Firms will be busy allocating resources to:

  • Create or procure the right technological capabilities to process data in ISO 20022 XML format
  • Identify their ‘UPI’ strategy and implement its corresponding solution which sounds fairly straightforward but firms should not underestimate the magnitude of this task. For more on this see our UPI Explained blog
  • Conduct in-depth business analysis to understand and map internal system workflows to its respective ‘Action Type’ and ‘Event Type’ combination(s)
  • Establish the gap between the requirements of new data fields against internal systems to ultimately build reporting capabilities that adheres to the ReWrite.

In addition to all of the above, firms need to navigate any potential last minute changes as we have seen thus far with the latest follow-on consultation that was released by ASIC in November. Not an easy task given that many firms are likely to be in their development phase with the majority of specification requirements already finalised.

Last but not least!

Whilst firms should rightly devote high focus towards the new build(s) for the ReWrites, they would be remiss to think that their work ends there.

Firms will have to review and recalibrate existing control frameworks to ensure that they remain fit for purpose. Although the harmonisation in standards should in theory help to simplify the whole reporting process, firms will now be reporting on a larger expanded set of data elements with some of these data elements themselves potentially being derived from complex processes (think UPI).

After all, this is hardly a new concept and market participants have had time to encounter the various nuts and bolts that go towards securing a robust regulatory reporting framework. It’s crucial that firms do not approach control frameworks as an afterthought and to have the necessary controls in place to ensure that their reported data is accurate and complete.

  • For a conversation with one of our regulatory specialists on the upcoming ReWrites outlined above, please get in touch