S10:E7 ISDA Special - Digital Regulatory Reporting with Tara Kruse and Andrew Bayley

In this show, we go in-depth on ISDA's Digital Regulatory  Reporting (DRR) - a repository of open source,  machine-executable code that will enable market participants to report faster and with higher data quality in multiple global jurisdictions and across different reporting regimes. Join our special guests Tara Kruse (Global Head of Derivatives  Products & Infrastructure) and Andrew Bayley (Senior Director, DPI Data and Reporting) from ISDA and our virtual studio crew for a fast-paced discussion of the future of derivatives reporting.

Transcript

Global Regulatory Reporting Trends and DRR

Andrew Walker 0:00

Hi, I'm Andrew Keith Walker. Hi, I'm Oshina Ishkevich-Utah.

Nick Bruce 0:04

Hi, I'm Nick Bruce

Nick Bruce 0:05

and this this is the number one regulatory reporting podcast in the EU, the UK and around the world. So join us as we go behind the scenes and under the hood to look at the big issues and news stories, companies and personalities who are shaping the world of regtech, fintech and trade repositories. Welcome to the Registr Roundup, trade repositories. Welcome to Regis-tr Registr Roundup. And remember, this podcast is brought to you by Registr, which is a six company and features members of the Registr team and special guests offering their personal opinions, not the opinions of Registr as an organization.

Nick Bruce 0:38

There is no representation made as to the accuracy or completeness of information in this podcast, nor should you take it as legal, tax or other professional advice. All right, excuse me, I probably didn't need to hear that quite so close to the mic. Hello, and welcome back to the Registry Hour Roundup. Yes, we are back and finally here in the UK it stopped raining and the sun is blazing down, and which is, you know, quite good news really for all of us. Not so much, obviously, for our virtual studio crew. Yes, joining us are people who have rarely let out into the sunlight these days because Amir Reef has gone live and they're super busy working inside in air-conditioned offices all the time. So we do treat them humanely, but they do have, sadly, a vitamin D deficiency. And on that front, joining us is the voice of Reason himself, the head of business development for RegistryR, mr Nick Bruce.

Andrew Walker 1:34

Nick welcome back. Thank you, Andrew, Good to be back.

Andrew Walker 1:36

It's good to have you back. You're just also back from panel events and a lot of interesting conversations at IDX, I understand.

Aušrinė Juškevičiūtė 1:44

Yeah, absolutely, it's been actually quite a busy period. So I think it's one of those where, post-refit, we're now in that phase of A, getting out speaking to clients, catching up with clients, but also there's a lot of events. So a lot of events looking at the lessons learned, looking at the next steps, but also then looking at the UK because, as we know, with regulation it never sits still.

Nick Bruce 2:05

Talking of regulations, never standing still. Our head of institutional relations, the pride of Spain herself, laura Rodriguez, can't be with us this week. But don't worry, because you may have heard, we have a new crew member joining us here in the virtual studio. Osrina Jusviticute is here. We call her the loyal Lithuanian. She's the powerhouse that keeps our institutional relations running. Ozrin, welcome to the show.

Andrew Walker 2:32

Thank you, Andrew. I'm really happy to be back here and looking forward for this podcast.

Nick Bruce 2:37

It's good to have you back, and I'm imagining you have got quite a lot of stuff to talk about, haven't you this week? Because there is a year of big regulatory change coming our way, not just Amir, but it's happening all over. And before we get to that, let's dive in with our special guest this week, because this week's theme. We have joined ISDA, the International Swaps and Revitives Association, here at RegistrCR, and joining us are two very special guests from ISDA, the International Swaps and Derivatives Association, here at RegistrCR, and joining us are two very special guests from ISDA. We have the global head of derivative products and infrastructure there, tara Cruz. Tara, welcome to the show. Hi, andrew, thanks so much for having us. It's good to have you along, and with Tara is Andrew Bailey, who is the Senior Director of Derivatives and Infrastructure for Data Reporting at ISDA, andrew, welcome.

Tara Kruse 3:28

Hi, andrew, thanks very much. Pleased to be on here.

Nick Bruce 3:30

Now I'm going to come to you in a second, but first of all I just want to start with you, azrina, because joining ISDA is obviously something I think is a predictable step for a trade repository. But you know, it's happened quite recently. Tell us what drove that decision.

Andrew Walker 3:48

Yes, sure, thank you for that question. So, first of all, I would like to say that we joined ISDA so it's a six group one year ago, in 2023, and actually in June. So today, as we're recording the podcast, it's our one-year anniversary and actually it's very one year anniversary and actually it's very nice that we are having ISDA speakers in this podcast today. And, yeah, it was Registriale initiative to join this Global Derivatives Association and mainly, you know, we were coordinating also with SIGS, also Public Affairs and ISDA membership team, you know, to be part of ISDA and also, you know, not for our benefits as trade repository, but also for other entities that we have at Six Group, and mainly the reasons, of course, there are many reasons that we wanted to join ISDA, but perhaps the ones you know, the key ones was to participate in the ISDA working groups. So, as you know, they key ones. So was to participate in the ISDA working groups. So, as you know, they have working groups on data and reporting and last year it was, all you know, discussions ongoing regarding AMIRAFIT. Now it continues with UKRAFIT and well, andrew Bailey knows perfectly this because you are, you know, the lead of this working group. So we also wanted to be involved and be up to date there. There's also a working group on digital regulatory reporting, which is today's topic. So, all in all, you know also be working there Also wanted to join ISDA events and they have lots of virtual events as well as in presence.

Andrew Walker 5:21

So, for instance, rits-tr participated last year in the event of regulatory reporting. We were also panelists and we also attended this year and actually looking forward to be more involved in the future events and, yeah, I think it just helps us to be up to date and, you know, help to make decisions, also influence important developments, get a bit more exposure. We have also six groups showcased on the ISDA webpage where we can also put information on what we are publishing. We have actually the link to our podcast of RegisTR so hopefully we could get more participants and more listeners from ISDA members also listening to us. And yeah, I think these were like the main reasons and I could tell that was a very good experience so far and we are looking forward to more closer going forward.

Nick Bruce 6:17

Well, that's great. Well, this is the perfect time to come to you, tara. And if you work in the industry you been around uh the derivatives and is there for any amount of time you will know tara crews already. But if not, uh she leaves. Is does product reporting and collateral teams, uh, she's heavily involved in the development of uh, is does uh various different sort of standard models like the, obviously, the, the standard initial margin model and the common domain model and also what we're talking about today, which is DRR, the digital reporting rules.

Nick Bruce 6:46

Previous to that and I won't go into your whole CV here because then you're just showing off frankly on the radio because it's stellar, it's a stellar CV, as I dive in Tara, prior to joining ISA, was the vice president in the derivatives projects group of Morgan Stanley. Prior to that, she was head of the America's derivative documentation and credit derivative documentation drafting at Morgan Stanley. And before Morgan Stanley, tara was global head of credit derivatives documentation at Bear Stearns. So when it comes to digital documentation, derivatives, rules and that kind of stuff, tara knows it inside out.

Nick Bruce 7:32

So I want to hit you with the big picture first and help us sort of drill down a little bit here, because global financial regulations in the sort of securities and derivative space are undergoing significant changes, it seems all year, and not just with EMEA. We've had EMEA refit go, but there is the JFSA in Japan, we've got ASIC in Australia, there's MAS in Singapore. So before we dig into DRR, let's just set that big picture. Are we seeing a global trend towards harmonizing data and reporting elements across different reporting regimes, different territories, or do different regulators have different objectives that you need to keep up with when you're putting something together like DRR?

Andrew Bayley 8:14

So the intention of the international regulatory community is the same, andrew right. They want to improve the accuracy and consistency of the reported data. In addition, the harmonization of data is a prerequisite to sharing and aggregating data. A future step that would give regulators greater insight into the market in reporting rules is a positive step. The rules won't be identical across all jurisdictions. There will be variations that continue to exist and each set of requirements will need to be individually reviewed, interpreted and applied, and there's no guarantee, actually, that each firm will interpret the requirements in the same way. And that's really, you know, where DRR steps in.

Nick Bruce 9:02

And Azreen from your side, from the regulator's viewpoint, you're our woman on the inside, so to speak, with ESMA. What's that kind of viewpoint? Do they look at what other global regimes are doing and does that influence their policymaking, or are they operating with very much a sort of laser light focus just on European markets?

Andrew Walker 9:22

Thank you for the question, andrew.

Andrew Walker 9:24

I think it's actually the same view from ESMA that because they have been working together with the FSB, with EOSCO, in order to improve consistency and accuracy in reporting and by doing that also to move towards harmonization Actually, actually, even in their strategy they even put you know that these standards are instrumental for both the regulators and the industry to move away from regime specific and solo approach towards a more holistic to data integrated reporting.

Andrew Walker 10:01

So I would say yes that ESMA now really is looking into it to have more harmonization and regulations, and we could see it with the refit, of course, and also in our refit we have ISO schemas, xml. This was also before with the FTR. So I would say yes, this is the way forward. However, I also agree with Tara that there are also still different regulations that could have different objectives. So each regulator really needs to know to see what's required for their market and to adapt to it. So urbanization is ongoing, but I would say gradually, and each jurisdiction needs to analyze what fits for them jurisdiction is still to to analyze what fits for them.

Nick Bruce 10:47

Now, tara, as well, I've read some of your pieces and contributions to articles uh that are out there in the uh the interwebs. You've written a lot about legacy systems and the problems that market participants face uh, because obviously there's completeness, accuracy, timeliness of regulatory compliance and that doesn't always work when you and we know from other organizations we've spoken to a couple of years back, speaking to Andy Dyson at Isla, some market participants are still using spreadsheets, so you know there is a legacy system issue. Is this really the core driver between products like the common domain model and the digital reporting rules?

Andrew Bayley 11:23

Yeah, it's certainly an important piece of the picture, andrew. So, because firms have had to work really hard and rush to get ready to comply with the regulations in various jurisdictions, they haven't always approached it in the most strategic way, but data reporting is here to stay for the long haul and therefore, even if firms didn't initially look at what's the strategic way, that I report in a harmonized, aligned way with other market participants that is cost efficient, it's not too late to do so and they can go back and look at it and see if there's a better way to do it, and we're hoping that they will.

Nick Bruce 12:00

And Nick, does this bring up for you as the business development guy in the room the elephant that is also in the room with you about the cost of reporting and how some market participants view it as a cost, and so investment in upgrading their legacy systems, engaging with new partners, sometimes feels like a cost on doing business.

Aušrinė Juškevičiūtė 12:23

Yeah, Sorry, I was just looking over my shoulder to see where the elephant was hiding, but I think from my perspective. So he was talking about the conferences and events I've been at and I was at the IDX earlier this week, which is obviously run by the FIA, and they had a very interesting sort of poll there amongst its members and it was looking at what they saw as the biggest challenges. And actually the biggest challenge that identified it was 52% of members said that their biggest challenge was the regulatory burden. They saw that as the biggest threat to revenues, which I thought was quite interesting. I think you're right.

Aušrinė Juškevičiūtė 12:56

I mean, we're talking about legacy systems, we're talking the backdrop of continued regulatory change, even though we're driving towards harmonization different flavors of harmonization.

Aušrinė Juškevičiūtė 13:07

You know, for companies this is cost and there's a huge cost to delivering this but also to getting it wrong. So that is driving the industry to look at, look, cost-effective solutions, but also with the backdrop of knowing that there's that own you know that onus on them of oversight and control. I mean, even when we look at refit, regulatory reporting is our business. We're a trade repository we step back, looked at refit and said really to execute on this, and that's both for the regulation, but to give the tools that our clients need. We needed a brand new platform, so we've delivered a new platform and that's our business. A brand new platform, so we've delivered a new platform, and that's our business. So, if you're, you know for our clients where it's not their core business, there is a huge cost attached to this, and probably, though, I would say there's probably a bigger cost if you get it wrong as well. So that's a real conundrum that they're looking at.

Nick Bruce 13:57

Okay.

Nick Bruce 13:57

Well, on the subject of conundrum, which is the plural of conundrums, I'm just going to float that one out there.

Nick Bruce 14:04

I just I feel over the clubber now On the subject of conundra, of course we do have an expert unraveling extremely complex things with us here, andrew Bailey, who, again, you probably know if you've interacted at all in this space with ISDA. But if not, andrew is the Senior Director of Derivatives Products and Infrastructure for Data and Reporting at ISDA. But he's also a key player in the development of the Digital Regulatory Reporting Initiative and, of course, prior to joining that, andrew was at the Bank of America Merrill Lynch for 14 years, holding several derivatives operations roles and also working in the regulatory reporting team there for five years. So as our reg tech expert, I want to come to you and say that the DRR, as I understand it, is providing a digitized representation of jurisdictional trade reporting rules through a single standardized machine executable open access code. That sounds pretty impressive, but it also sounds like something that must be quite a technical feat to pull off. Tell us a little bit more about it.

Tara Kruse 15:07

Yeah, thanks, andrew. Yes, it is technical and it needs to be. When it comes to reporting, details really matter, right? You can't skip the details. You mentioned a few times about the working group calls. I run data reporting. I have colleagues who cover the same topic in different regions. We have spent years with a mere refit, years going through each and every field, various scenarios, various products. After go live, there's scenarios and products or scenarios and fields that we've not quite thought through. It's like oh yeah, that's a good point, we hadn't thought about that one.

Tara Kruse 15:40

All of this has to be captured in machine executable code if the DRR, the ISDA DRR, is going to be a success, and that's exactly what we've done. The interpretations of the rules, which we've been doing not just for Amirifit. Isda's been doing this for years, ever since reporting started the interpretation of the requirements are reviewed as a community and we capture all that information, we publish it on the ISDA website and circulate with our members. It's in spreadsheets, in Word documents. The problem is then taking all of that agreement and implementing that, and at the minute we have thousands of reporting entities that are all implementing that differently and it may end up being the same, but sometimes it's not and the submissions pass the validation rules at trade repositories but they're not matching in a matching jurisdiction or perhaps they're not even correct. It may have missed the actual requirement itself.

Tara Kruse 16:32

Yes, it's passed the validation rule, it's 52 characters or it's the correct date, but it's not the actual data that should be reported.

Tara Kruse 16:39

And they agreed on the working rules and this is what the DRR steps ahead and actually does it on the work group calls, and this is what the DRR steps ahead and actually does. It takes that interpretation that we've done as a community. Ista has over a thousand members. I don't have a thousand people joining my work group calls, but I do have a lot of firms who have a real vested interest from the sales side, from the buy side, from trade depositories like yourselves, service providers, and they're all given their input to come up with a single solution as to how to report every field and every scenario for every product, and that's captured in detail in the DRR and it has to be in detail. So yes, it is very technical, but that's because regulatory reporting is very technical in and of itself. So that's what we've had to achieve through the DRR and we've proved that it can be done. We've got three jurisdictions which are all in production now.

Nick Bruce 17:26

And Nick, I mean, just quickly coming back to you, I'm guessing these sort of sets of standardized rules and open source machine executable code, that has to have a value, of course, for you as well. And do you see market participants asking for this kind of thing and you're sort of directing them at ISDA? I mean, you see market participants asking for this kind of thing and you're sort of directing them at ISDA?

Aušrinė Juškevičiūtė 17:51

I mean, you know what's your view of this, both as a TR, but also someone who's got the ear of the market. Yeah, for me this is all about adoption. So I think this is one of those things. As we see, adoption it can only benefit the market, because what you effectively get is if you have a market standard, if you have the industry agreeing on how you report certain fields.

Aušrinė Juškevičiūtė 18:09

We know there is a lot of ambiguity out there and that creates mismatches, probably in the areas that the regulators probably don't want to be focusing on because they want to look at the core economics. I think this can only be a positive thing. I think what this can also lead to is we just mentioned about the complexity and the cost of regulatory reporting. So if A you're reducing that cost, you're also making it easier for market participants to actually self-report. So not maybe move towards the outsourcing solutions, the delegated solutions. I mean that's better for the industry because you get true two-sided reporting and you're removing the ambiguity, and I think that, for me, has to be the future and the way forward.

Nick Bruce 18:52

And Tara. I mean there are lots of new things that have entered the realm of reporting, Like the UPI, like obviously, when SFTR came in, there was UTIs. There's the new ISO standard. Obviously it's not so new now, but it's new. If you've got legacy systems or you're upgrading your system, you must presume how do you keep abreast of these new developments, these new initiatives and liaise with organizations that are putting these solutions out there, like ANA, dsb and those sorts of people?

Andrew Bayley 19:24

Yeah, I mean there's a broad involvement of market participants in those conversations. So the regulators have their working groups through which they're producing and developing these standards, but they do regularly have consultations and ISDA always works with our members to make sure we provide valuable input to those. Sometimes our input is taken into consideration, sometimes it's not, but at the end result, once the standard is published, then at least we can take that away, develop that into the DRR and, where necessary, make sure the code reflects any variances or jurisdictional differences in relation to those data standards, so that you can still get viable, consistent, useful data.

Nick Bruce 20:10

And Andrew on that front. I mean, what about the complexity for market participants who might have reporting obligations that span different jurisdictions, because that has to be something that's difficult to get hold of. I mean, we know that there are some market participants who you know are trading in domestic Uasuries and also overseas US treasuries and it's all going to go through central clearing and it sounds like quite a major operational shift and that isn't even, you know, necessarily getting into the derivative space. So if you've got multi-jurisdictional reporting, how does the DRR sort of facilitate that and give benefits to market participants who've got global reach?

Tara Kruse 20:46

Yeah, I mean that's very relevant. The ISDA DRR at the outset we identified it had to have global reach. Our steering committee was very clear If it doesn't cover all the jurisdictions, certainly all the big major jurisdictions that has regulatory reporting, then it's not really being the solution that it should be. So the intention is and the reality is, drr is going to cover all these jurisdictions and the way it does that probably to take a step back that ISDA DRR is fundamentally based. The foundation for it is the CDM, the Common Domain Model. Now the Common Domain Model that work started at ISDA other trade associations, isda, the ICMA, have got involved is now an open source model with Finos.

Tara Kruse 21:33

The CDM is a standardized way to capture the components and lifecycle events of financial instruments. So you have a single way to communicate financial instruments. That's what allows the ISDA DRR to cover all these jurisdictions, because once you've standardized your financial products, then you can start looking at turning the rules into machine executable code and the point is you can have a trade which is in the CDM format. It flows down into the DRR model and you say well, this trade is in scope for Singapore CFTC reporting and UK EMEA. There's three jurisdictions this is in scope for and the DRR has modeled all three of those jurisdictions.

Tara Kruse 22:16

But it's just taken a single input, that single data file that's in the CDM and off the back of that it says, okay, well, here's the rules for CFTC, here's the rules for Amir and here's the rules for MAZ. Some of those are exactly the same. Some of those are jurisdiction-specific, some of those have some funky little ways of changing the format, but I can produce those three outputs in the ISO 20022 format that are going to meet those validation rules and meet those requirements. So it is all based on standards, right? This is what the DRR is. It's a golden source, a golden standard for implementing your reporting rules, and that itself is based on the CDM, which is a standard for how you represent your trades.

Nick Bruce 22:55

Okay Now, osreen and Nick, I've got to bring you back in here because the golden source, the magical lake of data in the sky, in the cloud, that we've all dreamt of for so many years, it feels like it's starting to emerge. Osreen, I want to start with you on that front because, of course, there is still the issue of Brexit divergence. We know UKME is kicking in in September, but potentially there will be more sort of divergence issues there. What about from the regulator's side? Are they looking at these sorts of DRR models and thinking, well, that's great for certain sets of jurisdictions, but it's not working elsewhere? Are they thinking, okay, fine, are they feeding into this process so that UK market participants who are reporting in Europe and the UK can also benefit from this sort of golden source approach? What's their view?

Andrew Walker 23:52

Regarding regulators and machinery that are executedable reporting.

Andrew Walker 23:57

So actually there have been some initiatives already from our regulator side, from the FCA, also ESMA and Commission. I remember a few years ago there was a Commission-initiated initiative, proof of concept, where they were looking actually, and there was a project where GCR also participated where they were looking actually, and there was a project where RISD also participated. So they were evaluating our possibility to have even a mere rules. They did like an example with a mere if that could be transposed to machinable, executable rules. So far, you know, that's what has been done.

Andrew Walker 24:32

Sure that they are probably thinking because you know we live in a digitalized world and you know the rules need to be adapted. But what I think is very good is that they took this initiative with the DRR and CDM. So we could see now that if already participants are going to implement this model, which would lead to more efficient and clear data to be reported to regulators. So regulators, even if it comes from the border, they're gonna benefit from that because receiving, you know, better data would serve for their supervisory purposes and also to to look at the risks and also to tackle, you know, what is needed to be done and take actions.

Nick Bruce 25:15

On that front. Then you've just been out with a whole bunch of market participants and trade organizations, the Futures Industry Association Derivatives Exchange Conference. So tell us, I mean, is everyone now EMEA's passed in Europe and actually it was fine and actually went pretty well and all the lessons were learned from SFTR and it's scaled up and everyone seems to be doing great. And so has everyone sort of relaxed in the uk about uk refit and it's going to be fine and the pressure's off, or are they all running around like headless chickens?

Aušrinė Juškevičiūtė 25:47

um, well, again, a lot of the feedback that I've been hearing over the last few weeks is people aren't actually even looking at UK refit, and the reason for that is and it's not that they haven't got it, they haven't got it on their radar that although we say that refit in the EU went well, there are still issues that need to be addressed, and I think one of the things is your measures of success on day one could well be different and will be different to your measures of success in three and six months' time.

Aušrinė Juškevičiūtė 26:18

And by that what I mean is at the moment we look at refit in the EU for a mere reporting and we say look, acceptance rates now are 98%, 99%. So actually the format of what we're receiving from market participants is adhering to the validation rules, but we're not really yet looking is adhering to the validation rules, but we're not really yet looking at the reconciliation rates. We're not looking at late reporting. There's a whole sort of set of data that's going to come out that will give us another view of how successful that is. And there are still issues. There are still things that don't quite work. Where there may be, there's relaxations that are happening whilst we work through and we go through a transition period and legacy data is upgraded. So there's still a big body of work is what I'm saying, you know, and that will roll into the UK.

Regulatory Alignment and Opportunities

Nick Bruce 27:04

Now, just while I've got you and I realize I'm going completely off script here, but I really want to know, tara, what's your view, your global head of reporting. When Brexit came around, did you think, oh come on, guys, seriously like the job wasn't hard enough already, or is it? Is this the kind of thing you just have to eat for breakfast?

Andrew Bayley 27:25

It's sort of a. I guess it's a challenge and an opportunity at the same time. Right, clearly it's easier if the rules are aligned across jurisdictions. If there's one a mere for UK and EU, then you know it's easier if the rules are aligned across jurisdictions. If there's one EMEA for UK and EU, then you know it's the same. So having UK EMEA, it presents an opportunity for divergence. But I guess it also presents an opportunity for us to engage with a different group of regulators to say, hey, wouldn't the rule be better, like this, right and because there's a desire for the UK and the EU to align right, if, for instance, you know the UK sees and understands a better way to require the data, then maybe the EU would follow. So there is a bit of opportunity to influence one versus the other because they have divergent regulations.

Nick Bruce 28:14

And Andrew coming to you because the FCA were heavily involved obviously in the creation of EMEA in the first place and they played a big role in the writing of those regulations pre-Brexit and you're based in the UK, you obviously interface with the FCA and other bodies as well. Are you finding that they're still very much engaged actually in this sort of development of regulatory standards, or is there a bit of a drift, maybe a change in focus from the FCA relative to other national competent authorities, say in the EU?

Tara Kruse 28:48

I think the FCA are still very much engaged in establishing global standards and I think that's the way to go. We don't want standards which are just going to be relevant to a few jurisdictions. We want it to be global. Upis, cde fields, the UTI, leis, any other acronyms you can think of. The FCA are still very much engaged in that and, as Tara said, it gives us the opportunity to speak with the FCA and their listening as well, to look at how they could perhaps improve reporting, which could have been done better under EU. Amir.

Tara Kruse 29:22

There is an acceptance now that there are different jurisdictions. I think it took a while for people to say, well, actually we want it to be exactly the same. That's not necessarily the case. There is a general acceptance and understanding that they are different and there are benefits. Again, as Tara was saying, there's benefits that we can achieve out of that as well and indeed there's discussions that the FCA have been very engaged, wanting to know what could be done better. But ultimately you pointed out yourself, andrew, the FCA were very much involved in the establishing of MIF first time. Same with MIFID, all these jurisdictions which there's an EU version, a UK version now. They're very much involved in it. It's not going to be wildly different. The outcome that they're going to produce now. Their views aren't going to suddenly be turned on its head. It's going to look and smell kind of like the EU version to some degree.

Aušrinė Juškevičiūtė 30:12

Yeah, and I guess, andrew, one of the points as well is and I know at this moment in time we've still got an outstanding Q&A coming from the FCA in the UK but the reality is, I guess, the feeling you would get with your conversations is it true to say no one wants divergence for divergence sake? Because the reality is we talk about the cost of reporting and the more you diverge, the more you increase the cost to operate in that market and it can make your markets unattractive as well, and people want to reduce that burden.

Andrew Bayley 30:43

They want consistency. I agree with Nick there. I guess one good thing about DRR, though, is if there are cases where we can't get regulators to align, we can account for that in the DRR build, so that you can have one set of data inputted and you know off of the jurisdiction specific code. It can allow for a variation and you can still get reports that are jurisdiction compliant.

Nick Bruce 31:07

I remember we talked about this with Dario Crispini back in, I think, episode two of the Registrar Roundup.

Nick Bruce 31:13

Dario Crispini from Kaizen, talking about systemic risk and the whole point of regulation coming out of the G20 back in the early 2010s.

Future of Regulatory Reporting Initiatives

Nick Bruce 31:24

And let's just take that for a minute, because the global harmonization of data, elements like the Unique Product Identifier, upi, critical Data Elevations, cde oh, I love the acronyms the Unique Transaction Identifiers, uti these things are all significant steps for crunching data, making it easier for regulators to process this stuff, and that informs policy. And obviously it's crucial for identifying systemic risk. And for those of us who thought, oh well, since 2008, there haven't been any, it's probably worth noting that in the domestic US banking scene, there were five bank failures last year and there has been some concern about how we stabilize that, which probably influenced, you know, decisions from the Fed or the SEC, such as, you know, mandatory clearing, that sort of stuff. So there is systemic risk still out there. It's a normal part of a healthy, functioning marketplace. So tell us, how do things? Initiatives like the DRR and, specifically, I guess, the digital reporting rules build upon the sort of goals of regulatory reporting to improve the life of regulators.

Andrew Bayley 32:35

Yeah, it's a great question and the answer really is the whole point is, the whole reason why they started these requirements was because regulators wanted to have more insight following the financial crisis in 2008.

Andrew Bayley 32:47

What's happening in the derivatives markets? How do I either foresee a potential market event that's coming or how do I understand, post that event, what the impact is going to be? And so that's really the driver for these reporting requirements. The need for better, more consistent, high quality data is the driver for the rewrites to these reporting requirements, because regulators know that it's very important for them to have insight into what's happening into derivatives markets. So by improving this data right, they should hopefully be able to pinpoint any trends in that data that might help them make the right inquiries to identify, you know, a trend in the market, a concentration in risk, a counterparty, you, et cetera right, and by harmonizing their data, then hopefully they set themselves up to eventually share and aggregate data in a way that'll give them insight outside of their borders and have a better cross-border perspective of what's happening in the market.

Tara Kruse 33:52

Something that is the DRR gives regulators is insight to how that logic is written as well. You wouldn't, as a regulator, normally be able to just see. Well, how does Bank X interpret this rule and how they implemented it in their reporting system? Well, drr gives them that it's fully available to regulators as well as market participants. They can see how the industry have interpreted given field should be reported. You know what should the logic look like? It's right there. If the data they're receiving as a regulator doesn't quite make sense to them, they can look at the logic as to how it's been reported and perhaps make sense of. Okay, now I understand what it means. Or perhaps it goes the market misinterpreted. I need a Q&A or something like that, you know, to get the clarity.

Andrew Bayley 34:35

Right there's a human readable component right that sits alongside the machine readable, machine executable component, so that laymen those of us who are not as technical can still understand the rationale behind the code. Okay great.

Nick Bruce 34:50

Now this feels like everything is swimming along, it's a done deal, it's all done. Supposing I'm a market participant, I'm listening to this and I'm thinking hang on a second. I'm not involved with ISDA and the DRR. I mean, is it too late for people to get involved with this project and to interface with you? What would be the next steps for them, or your advice for them, if they feel like they've missed the boat?

Andrew Bayley 35:15

It's not too late at all, andrew. Our working groups continue to meet regularly. We're going to look at future jurisdictions, we're building out other jurisdictions for the DRR, and so firms should get involved in our working groups and consider their business case for transitioning to DRR right, whether that's for an upcoming reporting rewrite say in the UK or Australia or Singapore this year, or for future jurisdictional compliance say in Hong Kong or Canada in 2025, or whether they want to look to transition. Their existing build Reporting requirements are here to stay, and so there's a long-term value to transition from legacy frameworks into DRR, where firms can benefit from the consistency and the cost savings over individualized implementation.

Nick Bruce 36:04

You've moved, haven't you over to FinOS in September 2022. And this is like the repository, isn't it for the common domain model and enables users to access all those resources. And I'm guessing, then, andrew, you've been working on this CDM now four years. The core open source repository is there. There are big market players engaged with that. What are your thoughts on that development? What are the future plans? Where do you go from here? Because it feels like that's all going to be an important part of how the DRR and future digital projects land.

Tara Kruse 36:44

Yeah. So just to clarify there, andrew, you've got the CDM and that is with Finos. That's fully open source. You also have the ISDA DRR and that is separate to the CDM, but it uses the CDM as the input. The ISDA CDM is open access, so it's free to anyone to use. You don't have to be an ISDA member. There's no paywall. One of the strengths of the DRR well, one of the aims of the DRR is that it brings consistency to the market. You don't have to be one of ISDA members to benefit from it. In fact, isda members themselves would benefit if everyone's using it.

Tara Kruse 37:20

Looking ahead to the future, it's an expansion of the jurisdictions. For sure, we're going to keep on supporting future changes, whether it comes through a Q&A, whether it comes through industry best practices or who can wait for the next big rewrites. We will be there supporting it in the ISDA DRR. But it can go further as well. It doesn't have to just be OTC derivatives or ETDs as well, I should say, because that's in scope, of course for Amir. We can look beyond that. I mentioned earlier ISDA and the ICMA, both heavily involved with the CDM. So we could look at securities reporting, sftr being the obvious one. We could look even beyond that. The CDM, so we could look at securities reporting, sftr being the obvious one. We could look even beyond that. The CDM can support financial products in retail. You could do reporting for mortgages.

Tara Kruse 38:04

Really, the other DRR can be expanded and improved upon to cover various types of financial instruments. At the minute it's very much focused on producing the reports. We can expand it to look at eligibility and that is very much on that horizon as well. I mean, regulators are running their own. Some regulators, anyway, are running their own machine-readable and executable initiatives. In the EU we have the MRER initiative. In the UK we have Transforming Data Collection. Whatever they come up with is going to look very, very similar to the CDM and DRR and we are speaking with them. Look, here's a model that you can use now. It's free, it's there, you can use it. We'd love to see you working with it and I think, ultimately, I would like to see a world in regulatory reporting where regulators and the industry are all gathered around a single model. And you know, really at the minute DRR is the ISDA, drr is plowing the way.

Nick Bruce 39:03

Good, great, okay. Well, that brings us inevitably to our crystal ball question. We love our crystal ball questions here on the show, and so I'm going to start off by asking Andrew gaze into your crystal ball for us and tell us what's ISDA going to be working on and focused on this time next year, in 2025?.

Bacon and Cocktail Foods Quiz

Tara Kruse 39:27

Okay, well, we know we've got more jurisdictional rewrites coming, so 2025, we'll see HKMA in Canada. So that's definitely already part of our plan for the ISDA DRR, but beyond that we're going to have method rewrites. We can look to other jurisdictions South Korea, quite possibly Switzerland, anything which is coming up regulatory route-wise. The ISDA is going to be there supporting it, as we always have done anyway, in regards to interpretations, but also incorporating it into the ISDA DRR as long as there's, you know, continual support to do so, and the support at the minute is only growing. So we're absolutely committed to supporting all those jurisdictions for 2025 and beyond.

Nick Bruce 40:07

The rewrites are not going anywhere yet and, Tara, I mean from your point of view, this time next year what's going to be happening? I'm guessing there will be a number of events or webinars or various things taking place between now and then. Anyway, but what are you going to be focused on? On those and this time next year?

Andrew Bayley 40:25

Yeah, so, as Andrew says, drr continue to be a priority for ISDA, but we're clearly involved in many other initiatives, a lot of them regulatory driven Right. So, for instance, a big focus for us will be on holistic margining practices. It's a priority issue for regulators, part of their work to address vulnerabilities that we've seen in various stress events, like the Dash for Cash in March 2020. We recently submitted our response to the FSB's consultation on liquidity preparedness for margin calls, and so things like transparency on CCP margining practices is key for planning ISDA's going to transition to semi-annual calibration of the ISDA SIM starting next year, in response to regulatory feedback. We're also working with industry participants to further standardize and automate collateral processes. For instance, we're using the common domain model to digitize collateral docs and automate margin and settlement processes in order to speed up onboarding and cut manual processing errors to reduce operational liquidity and counterparty asks. So you know, a similar set of benefits as we're doing on DRR, but applying it to a different use case.

Nick Bruce 41:40

Okay, great, well, you'll be busy then, but before you have to rush off and go to your next working group, which I'd imagine is probably happening soon, um, you can't actually get away that easily from the show. This season we have introduced a? Uh, a new post refit feature, which is the? Uh timed beat the buzzer quiz. Uh, which was first uh participated in by tim hartley and uh, mr john graham course in our last show. If you haven't heard it, go back. Needless to say, john's knowledge of Bruce Springsteen is significantly greater than Tim's knowledge of sausages. This time around, Next time, tim gets to pick the specialist subject To make it fairer this episode, neither of our guests know this is coming and haven't got any pre-warning whatsoever about the ridiculous quiz you're about to be hit with. So it's very simple. I will start the timer. No wrong button. I will start the timer and you will have one minute to answer as many questions as you can on your specialist topic. And who wants to go first, tara or Andrew?

Tara Kruse 42:52

I'll go first then.

Nick Bruce 42:54

Okay, fine. Fine, andrew. Okay, your timer is going to start now and your specialist topic is bacon and bacon-related products. So, andrew, your timer starts now. Products. So, andrew, uh, your timer starts now. Okay, michael zary invented a bacon-based cleaning product. What was it called baconite? Uh, no, bacon soap is the answer okay michael zary also first published the recipe on his for bacon soap on his daily bacon-themed blog, which was called Bacon Something.

Tara Kruse 43:39

Bacon Make-Em.

Nick Bruce 43:42

Very good. The correct answer was, of course, bacon Today. Of course it was. When was bacon first recorded in human history? 3000 BC, very close, it was 1500 BC, but I think we'll give you half a point for that. And where was bacon invented? In a pork farm. Actually, you get half a point for that as well. You're off the marks there. It was actually invented in China, as it turns out. Okay, quick, quick. Where does the word bacon come from? Which European language did it first emerge? In Danish? Very close, it was actually Germany, but at the time Denmark was part of the Germanic Empire, so I'm going to say Exactly.

Nick Bruce 44:27

Yeah, I was going to say, okay, great, good result part of the germanic empire. So I'm going to say, exactly, yeah, I was going to say, okay, great, good, good result. In the usa, which cut of bacon is referred to as canadian bacon. In the uk we refer to it as, uh, a part of the pig's body belly, is it streaky then?

Nick Bruce 44:43

uh no, no. In the usa canadian bacon is back bacon. Alan alder, real perlman, uhman, rip Torn, michael Nunn, all start in Michael Moore's satirical 1995 comedy. That was actually John Candy's last movie. It was called Something Bacon. Can you think what it was?

Tara Kruse 45:03

God, I love John Candy as well. What was his last film? Bring it Home the Bacon.

Nick Bruce 45:10

No, it was in fact Canadian bacon there, which cut of Italian bacon is usually made from the pig's face.

Tara Kruse 45:20

I'm hoping it's pancetta.

Nick Bruce 45:21

It's not. It's guanciale, I'm afraid. Final question what variety of bacon comes from the side of the pig? And I'll give you a clue it's not back bacon.

Tara Kruse 45:31

Is there such a thing called side bacon? Otherwise I don't know.

Nick Bruce 45:34

It's streaky bacon. Oh, that's not that area.

Tara Kruse 45:37

Okay, you know, frankly, I'm never eating bacon again after that. It's awful.

Nick Bruce 45:44

For a spot quiz on bacon, which you had no preparation for a warning. You did very well and I I managed to talk about. I think you got a maximum there of two points. So well played.

Aušrinė Juškevičiūtė 45:53

Well played, sir I think a great effort there, that that was cruel that was hard, that was that was tough.

Nick Bruce 46:02

You know, uh, I'm glad you were so generous in your support there, tara, because yours is coming up next and uh, you've got a. Really, you've got a real doozy as, because yours is coming up next and you've got a real doozy as well, because yours is cocktail foods you would probably get at a conference and your timer is starting now One minute coming up. What sparkling wine is most likely to be served at a conference? Prosecco, correct. Which two grape varieties are the most likely red wines to be served at a conference?

Andrew Bayley 46:33

Pinot Noir and Pinot Gris.

Nick Bruce 46:39

Sally, that's the one, it was actually Cabernet Sauvignon and Merlot Name, two of the three most popular conference fruit bowl fruits.

Nick Bruce 46:50

Pineapple and cantaloupe, okay, no, sadly, I could have accepted apple, orange or banana. Which traditional French breakfast food is usually on offer with the coffee station at a conference in the morning? Croissants Correct. Which variety of tomato is most likely to be served as a canapé? Cherry tomatoes Correct. Name the fish usually served with creme fraiche and blinis at evening drinks before the conference dinner? Salmon I can only give you half a point. For that you have to refer to the way it's been prepared. Lox Very good, yes, smoked salmon or lox, we can take that. What is the most common meat option at a conference dinner? Chicken, it is chicken. Which popular form of savory tart was miniaturized by conference caterers in the 1980s? Quiche, lorraine, it was quiche'll. Accept that? Coronation chicken. The popular sandwich filler contains chicken, mayonnaise, mango chutney and one other fruity ingredient. What is it? Sultanas? It is sultanas. And finally, what is the standard length of a cocktail stick? I can accept anything. Uh, in the range, uh three inches.

Andrew Bayley 48:07

Three inches, that is inches, that is correct.

Nick Bruce 48:09

That is the shortest allowable legal length for a cocktail stick. Wow, now, in all fairness, andrew, number one, it's very kind of you to let your global head win the round there. That's why she's the boss, right, yeah?

Nick Bruce 48:28

You know in all fairness, and obviously, tara, I'm just going to say now you have made very good use of, uh, the round there. I think she's the boss right. Yeah, you know, in all fairness. And obviously, tara, I'm just going to say now you have made very good use of your time at conferences and you're very observant. Thank you very observant there and you scored a seven. So frankly, I'm going to be honest with you there, I think, in spirit, andrew did better than everyone, uh, for resilience as well, and, tara, you're actually now on the top of the leaderboard. You've actually knocked john graham uh down. Uh to second place and chris harley sorry, tim hartley to third. So, well played there.

Nick Bruce 48:56

And I guess on that, uh, you know, exciting note, it's time for us to say goodbye to our special guests and draw the show to a close. So please do make sure to join us on our linkedin page that's linkedincom slash company, slash register, hyphen TR where you can network with Nick and with Osrina and with Tara and with Andrew and generally find out more about the show and the work we're doing. And in the meantime, I guess all it really falls to is saying a huge thank you to our very special guests this week, and that is Andrew Bailey, who is the Senior Director of Derivatives and Infrastructure Data Reporting Isda. Andrew, thank you very much.

Tara Kruse 49:37

Thank you very much, Andrew.

Nick Bruce 49:37

It's been a pleasure and also a huge thank you to the Global Head of Derivatives, products and Infrastructure at Isda, and that is, of course, tara Cruz.

Andrew Bayley 49:47

Thank, you, andrew, really appreciate it.

Nick Bruce 49:51

And also a big thank you to our new institutional relations star, the loyal Lithuanian, the brilliant Ozrina Juskeviciuti. Yeah, see, I got it right. Just so you know, in rehearsals I've mispronounced Ozrin's name consistently for about three years now. So I'm just I feel good about that one. Was that close enough.

Andrew Walker 50:17

Thank you, Andrew. Yeah, that was very close. Okay, that's good, Ozrin thank you.

Nick Bruce 50:25

And last but not least, of course, the voice of Reason himself, the head of business development, the man who is my regular co-host on the show because he's not allowed outside, Hence his bizarre pallid white color. It is I'm joking, he's actually got a lovely tan today. It is Mr Nicholas Bruce.

Aušrinė Juškevičiūtė 50:44

Thank you, andrew, and a huge thank you to Tara and Andrew Really enjoyed it. It's been a great show. It has been a great show.

Nick Bruce 50:49

It has been a great show. Thank you everyone. A big thank you to our production crew as well, that's Isabel Martinez, and to Liana Sudan, and to all of you for listening. We will be back in a month with more of the latest news, views and looking under the hood of the regulatory reporting business. And until then, from me, andrew Keith Walker, bye-bye.