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The report compares three basic options for aggregating OTC derivatives trade repository data: Option 1 - a physically centralised model; Option 2 - a logically centralised model; and Option 3 - the collection and aggregation by authorities themselves of raw data from trade repositories. The options are compared according to their suitability for meeting authorities' needs as data users, and the legal, data and technology considerations that they give rise to.
This report finds that aggregation Options 1 and 2 are highly preferable to Option 3 in order to ensure that authorities have access to the aggregated data that they need in order to perform their mandates and meet the G20 objectives. While Option 3 is the only one of these options that is currently available for use, it has practical limitations that allow it to meet only part of authorities' data needs, beyond protecting against market abuse.
The report recommends a number of key steps that should be undertaken either as part of the preparatory work before any formal project is launched to implement a global aggregation mechanism, or that will need to be undertaken irrespective of the particular aggregation model chosen, in order to enable effective aggregation.
The report notes that, amongst these steps, it is critical for any aggregation option that the work on standardisation and harmonisation of important data elements be completed, including through the global introduction of the Legal Entity Identifier (LEI), and the creation of a Unique Transaction Identifier (UTI) and Unique Product Identifier (UPI). The report also indicates, in broad terms, the types of legal and regulatory changes that would be needed to allow a central mechanism to access the necessary data from trade repositories and to aggregate the data for authorities. While further work in both of these areas will be challenging, progress will be essential for a global aggregation mechanism to be effective. These steps would also provide broader benefits for the reporting and usability of trade repository data, beyond the benefits for a global aggregation mechanism.