Attendees provided valuable insight on Title VII’s global regulatory impact
LONDON, UK – 30 May 2012: Lombard Risk Management plc (LSE: LRM) (“Lombard Risk”), a leading provider of integrated collateral management and liquidity, regulatory and MIS reporting solutions for the financial services industry, on the 7th of May participated on a panel of experts at the 2012 BAFT-IFSA Annual Conference in Miami, Florida. The overall theme of the event was ‘Accelerating Change in Global Banking’, making Lombard Risk’s subject matter quite timely.
Margaret Bailey, Sales Director – America of Lombard Risk, shared her insights on the potential regulatory impact that the Dodd-Frank Act Title VII will most likely have on the global banking community.
Ms. Bailey explained how two regulators – the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) – were defining a swap reporting regime to collect data from financial institutions for real-time public dissemination as well as confidential regulatory use. The reporting regime will provide price and volume transparency as well as market oversight in order to enforce position limits and track systemic risk, with an overall goal of preventing a reoccurrence of the ‘financial crisis’.
Ms. Bailey commented: “The regulators are demanding all information reported ‘as soon as technologically practicable’ for swaps executed on and off the swap market. There is a significant focus on ‘real-time’ which may cause ‘real issues’ for firms with silos of data.” She continued: “The SEC has defined this as ‘real-time’, but added a caveat of ‘in no event later than 15 minutes after the time of the execution’.”
Ms. Bailey further stated: “We do not see this as a U.S.-problem only. European regulators are on the same track, with EMIR and MiFID2 expected to be operational towards the end of 2013. The Dodd-Frank regulations affect European and other foreign banks in the U.S. that are active in derivatives.”
The swaps that are impacted by this regulation are defined as:
- A counterparty to a trade is a U.S. person OR
- The trade is cleared in a U.S. Derivative Clearing Organization OR
- The trade is executed on a U.S. Swap Execution Facility or Designated Contract Market
While this appears all encompassing, Ms. Bailey closed her presentation by illustrating a scenario whereby:
- “an English trader, working for a French bank, is on holiday in America, when she pops into her U.S. branch to finalize a trade between an Italian and Swiss company”
She noted: “This scenario would fall within the regulatory definition. It wasn’t that the trade was executed with a U.S. counterparty, rather it was purely that the trader was physically IN the U.S.”