Catena OTC derivatives trade reporting survey reveals 80% of market extremely concerned with data quality

16 June 2016

Catena Technologies today released the results of a trade reporting survey based on responses from participants in a series of industry events held in early 2016. The survey revealed that 80% of the market is extremely concerned about the quality of the OTC derivatives data being reported to the regulators. Thirty-eight percent of respondents highlighted that position reconciliation is one of the most challenging areas for trade reporting. However, more than 90% of the participants had yet to fully automate reconciliation processes across all asset classes. Sixty-three participants responded to the survey.  Participants ranged from a variety of financial institutions, including global banks, regional banks, and various buy-side firms. Participants represented a number of geographic locations, including Singapore, Australia, India, Hong Kong, China, Japan, Canada, and the U.S.

At the series of events, Catena introduced its data quality review services, aimed at helping firms improve the quality of their OTC derivatives trade reporting and increase operational efficiency. In the U.S., regulators have recently undertaken punitive action against banks for incomplete and inaccurate trade reporting, and regulators in Asia Pacific are also gearing up for increased scrutiny of trade reporting quality. One of the key challenges that firms face with trade reporting is orchestrating data across both internal and external sources in order to meet regulatory requirements. Catena’s data quality review services complements its TRACE Reporting product, a platform used by a growing number of financial institutions to manage the workflow for accurate reporting of OTC derivatives information to regulators via trade repositories.

The survey also revealed that 54% of respondents believe that the greatest challenge is understanding current trade reporting requirements and adapting to new requirements. Universal trade identifier (UTI) pair and share reporting was an area of particular concern. Thirty-four percent of respondents indicated that they use electronic platforms to generate UTIs for at least some transactions, but more than half of the participants reported that they manually generate UTIs. Forty-nine percent reported that they face challenges preparing for the UTI pair and share workflow, which includes generation and communication of UTIs to counterparties, as well as the receipt and reporting of UTIs generated by other counterparts.

"Although the market has made significant progress in trade reporting, there are still major challenges ahead to ensure high degrees of data quality,” said Aaron Hallmark, CEO of Catena. "Regulators face mounting pressure to derive useful insights that enable market interventions. As a result, we are seeing increased regulatory scrutiny of data. Many firms that deployed tactical solutions to meet compliance deadlines are now looking for strategic solutions that can improve their reporting efficiency, adapt to business growth and new requirements, as well as address data quality concerns. Catena is committed to help firms tackle these challenges.”

“Catena’s research validates what we have been hearing at DTCC: Market participants are placing more focus on the controls and reconciliations around reporting, with a goal of maintaining 100% compliance.” commented Peter Tierney, Head of DTCC’s GTR Asia, “Regulators are starting to use the data in its current form, and early stage analysis is driving an increased focus on data quality.  Greater analysis and usage will drive higher data quality, which in turn will enable better analysis.”

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