Operational Risk & Regulation
Financial industry experts are concerned that while the Dodd-Frank Act calls for real-time trade reporting, this will ultimately be misleading; real-time or ‘T0′ reporting will not give a clear or accurate picture of the trades they relate to. The Dodd-Frank Act mandates that swap transactions be reported to a real-time disseminator as soon as technologically practicable.
Many commentators argue that the main challenge will be getting data at T0 that is complete and accurate. GreySpark maintains that forcing a higher frequency of reporting and making it publicly available is likely to be counter-productive, highlighting that too much transparency on non-flow products will impact liquidity.
The consultancy identifies that T+1 reporting is better suited to the market-place, with it providing enough transparency to market participants, while allowing enough opacity to avoid penalising liquidity, because of the fear of information leakage and the resulting adverse market impacts this can bring. GreySpark does however identify the merits of real-time reporting – to effectively counter and fraudulent activity, having the ability to act as soon as this occurs.
A compromise, however, should be available. A regime that delivers real-time transaction reporting to the supervisors, which are made publicly available to the whole market by the close of business on a daily basis, would be such a situation that could work.
