Speaking at the annual conference of the Association of Corporate Treasurers in Glasgow, repository executives said the number of trades that could be matched was still "very, very low" where counterparties have chosen to send their side of the transaction report to different venues – the result of widespread confusion over the unique trade identifiers (UTIs) that are supposed to help pair up the reports. "For reconciliation between multiple repositories the matched figure is very, very low, and it's one of the significant challenges we have to overcome. You could have five men in a room but if you don't have a conductor they're never going to play in unison – that's where ESMA needs to come in and help. It's a concern that UTI reconciliation is not working as efficiently as it should", said Andrew Green, global head of Deriv/Serv account management at the Depository Trust & Clearing Corporation (DTCC).
The problem stems from a general lack of readiness by market participants – particularly non-financial corporates, but also the banks and repositories on which they were relying. In their defence, derivatives users say regulators failed to give clear guidance on some elements of the regime and did not leave enough time for them to comply. The approval of the first TRs in November triggered a 90-day countdown to the reporting compliance date. In order to report to a trade repository, counterparties require both an LEI and a UTI, with the former being a prerequisite for the latter. Market participants should have registered for an LEI well before the reporting start date, but many did not.
Working groups have now been set up to tackle the problem and the industry is seeking feedback from ESMA on prospective fixes, the DTCC's Green said. "We need some acceptance from ESMA on what's an appropriate solution. If we can get that, as we did from the Commodity Futures Trading Commission, that's a big step. I think ESMA has got an awful lot to do in giving that guidance. We need it, and I don't know necessarily when that will come forward. There is talk of the Financial Stability Board getting more involved as well, because we'll be talking about trades in multiple TRs across multiple jurisdictions", he said.
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