secops north america 2016 reg sbsr: security based swap …€¦ · if they can be netted then they...

SecOps North America 2016

Reg SBSR: Security Based Swap Reporting

Brian Lynch, CEO, Risk Focus


Agenda

Overview

Different from CFTC

Timing

Backloading


Regulation SBSR – high level

The SEC has regulatory authority over “security-based swaps,” which are defined as swaps based on a single security or loan or a narrow-based group or index of securities (including any interest therein or the value thereof), or events relating to a single issuer or issuers of securities in a narrow-based security

Reporting of SBS data by market participants to a registered Security Based Swap Data Repository

Public Dissemination of a subset of the reported data by the SBSDR in order to provide post trade transparency

Covers the following transactions

– SBS executed on a platform with principle place of business in the US

– SBS effected by or through a US registered broker dealer, guarantor, Major Swap Participant, or Security Based SEF


Regulation SBSR – product coverage

Credit

– Single Names and Options on Single Names, Bespoke with Basket size < 9

Equity

– Single Name TRS, Forwards and Options, Bespoke with Basket size <9

Rates

– Debt options, exotics


Regulation SBSR – ISDA TaxonomiesInterestRate: Credit: Equity:

Exotic SingleName:ABS:EuropeanMBS Swap:PriceReturnBasicPerformance:SingleName

Option:DebtOption SingleName:RecoveryCDS:FixedRecoverySwaps Swap:PriceReturnBasicPerformance:Basket

SingleName:RecoveryCDS:RecoveryLocks Swap:ParameterReturnDividend:SingleName

SingleName:Corporate:AsiaCorporate Swap:ParameterReturnDividend:Basket

SingleName:Corporate:AustraliaCorporate Swap:ParameterReturnVariance:SingleName

SingleName:Corporate:EmergingEuropeanCorporate Swap:ParameterReturnVariance:Basket

SingleName:Corporate:EmergingEuropeanCorporateLPN Swap:ParameterReturnVolatility:SingleName

SingleName:Corporate:EuropeanCorporate Swap:ParameterReturnVolatility:Basket

SingleName:Corporate:JapanCorporatePortfolioSwap:PriceReturnBasicPerformance:SingleName

SingleName:Corporate:LatinAmericaCorporate PortfolioSwap:PriceReturnBasicPerformance:Basket

SingleName:Corporate:LatinAmericaCorporateBondContractForDifference:PriceReturnBasicPerformance:SingleName

SingleName:Corporate:LatinAmericaCorporateBondOrLoanContractForDifference:PriceReturnBasicPerformance:Basket

SingleName:Corporate:NewZealandCorporate Option:PriceReturnBasicPerformance:SingleName

SingleName:Corporate:NorthAmericanCorporate Option:PriceReturnBasicPerformance:Basket

SingleName:Corporate:SingaporeCorporate Option:ParameterReturnDividend:SingleName

SingleName:Corporate:StandardAsiaCorporate Option:ParameterReturnDividend:Basket

SingleName:Corporate:StandardAustraliaCorporate Option:ParameterReturnVariance:SingleName

SingleName:Corporate:StandardEmergingEuropeanCorporate Option:ParameterReturnVariance:Basket

SingleName:Corporate:StandardEmergingEuropeanCorporateLPN Option:ParameterReturnVolatility:SingleName

SingleName:Corporate:StandardEuropeanCorporate Option:ParameterReturnVolatility:Basket

SingleName:Corporate:StandardJapanCorporate Forward:PriceReturnBasicPerformance:SingleName

SingleName:Corporate:StandardLatinAmericaCorporateBond Forward:PriceReturnBasicPerformance:Basket

22 More….


Regulation SBSR – reporting parties

Who has to report?

– US Persons - SEC Registered Security Based Swap Dealers (SBSDs) & Major Security Based Swap Participants (MSBPs)

– Proposals exist to include Clearing Agencies, Platforms, non-US persons with SBS dealing activity involving US Personnel for Arrangement, Negotiation, and Execution (ANE)

– “Substituted Compliance” is in the final regulation, which allows for non-US persons to report to the Trade Repository in their local jurisdiction if the SEC determines that it meets the “regulatory requirements of public dissemination”.

Reporting “Side” is determined through a set of rules with tie-breakers

Non-reporting side is still responsible for providing secondary information to the SDR


Different from CFTC

Timing

Treatment of cleared transactions

1.5 sided reporting

UIC

LEI – Legal Entity Identifier

ANE – Arranged, Negotiated or Executed by US Persons

Rules 901 – 24 hour timeline for reporting during ‘interim’ phase

Back-loading – due to timing– Pre-enactment & Transitional

Lifecycle events – no snapshots

Inter-affiliate trades not exempted


Timing? Very unclear

Final Rules not yet published

SEC set a deadline for June 30 2016?

Registration of SBS Dealers not finalized

Impact on buy-side based on timing of SBSD registration


Back-loading of Historical SBS

Pre-enactment Swaps – live before & after June 2010

Transitional Swaps – traded in / out after June 2010

Live Swaps – Traded pre-compliance but still live

“Live” SBS will be disseminated by the SDR


SBSR –ADDITIONAL DETAILS

Appendix


Regulation SBSDR – highlights only

SDRs are required to collect and maintain accurate SBS transaction data.

Establish automated systems for monitoring, screening, and analyzing data

Confirm with each counterparty the accuracy of the data submitted

Have Policies and Procedures to maintain complete and accurate data

Provide facilities for resolving disputes over the accuracy of the data

All transactions are keyed off of Unique Identification Codes (UICs)

– Composite ID based on reference data elements (details on subsequent slide)

– SDRs are required to created standards where global standards don’t exist

• Trader Id

• Trading Desk ID

• Product ID

• Branch ID


UICs - A lot of the details are still TBD

UICs are required for all reportable data. These will be composite IDs comprised of the following:

Counterparty ID (most likely LEI)

Transaction ID

Execution Agent ID (maybe LEI)

Ultimate Parent ID (LEI of Guarantor)

Branch ID (TBD - needs to be developed. May only be required for non-US branches)

Trader ID (for both sides of the trade - probably NOT PII but consistent ID for each person within each LEI)

Broker ID (if applicable)

Platform ID (if applicable – maybe LEI)

Product ID (Methodology still missing from final rule of ISDA OTC Taxonomy)

– Unique identifier for each group of SBS contracts that share the same characteristics. If they can be netted then they share the same Product ID.

– If not available (?) then information that identifies the SBS, including Asset Class, Effective Date, Termination Date, Terms and schedule of payments, and any other customized terms not covered yet by the other terms.


Primary Trade Information

Basic material terms of an SBS that get disseminated to the public by the SDR

Product ID

Timestamp of execution down to the second

Notional amount and currency

SBSD ID (if both sides agree to that during negotiation)

Intention to clear (not where they will clear)

Special conditions/flags (SDRs will specify how these will be represented). Examples:

– Inter-affiliate SBS

– Netting or compression transaction

– Transaction resulting from clearing firm’s “Forced trading session”

– Transaction being reported late

– Transactions resulting from a clearing member’s default

– Packaged trades


Secondary Trade Information

Information reported to the SDR but NOT disseminated to the public by the SDR

The remaining fields of the UIC for both counterparties

– Note that there is a burden on the non-reporting side to get these details to the SDR. This is being termed “One and a half sided reporting”

If existent, any other terms not provided as part of the Primary Trade Information, e.g. customized payment terms.

If existent, any other fields not included in the Primary or Secondary trade information that re necessary to determine the market value of the transaction.

For clearing transactions, the name of the clearing agency

For non-clearing transactions

– Indicator that both parties have applied for non-clearing exception

– The title and date of any agreements associated with the SBS contract (master, collateral, margin, etc.)

For allocations, terminations, novation, or assignments that don’t result from netting or compression, the Transaction ID of the original transaction.

secops north america 2016 reg sbsr: security based swap …€¦ · if they can be netted then they...

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