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The group of G20 nations in 2009 directed governments to create a composite record of over-the-counter (OTC) derivatives deals to better spot potential systemic risk in banks and clearing houses and help prevent the next big financial meltdown. But there has been a proliferation of electronic data warehouses that do this job, known as trade repositories, with 25 of them operating in 11 jurisdictions around the world.
David Wright, secretary general of IOSCO, said there were “too many trade repositories” and that “the plugs don’t fit”. “Basically you’ve got a fragmented situation and the challenge is to get all of these things connected up so you can get an aggregate picture [of markets],” he said after attending the International Swaps and Derivatives Association’s Asia meeting in Singapore. His warning underscores how regulators are increasingly worried about how to spot the next crisis given that new regulations designed to clean up after the 2008 crisis, especially that more derivatives are traded electronically and not by phone, are creating a wave of new data that must be tracked and monitored. He singled out shadow banking as another area of concern.
No framework yet exists that would allow global regulators to track or monitor risk in cross-border markets. Some countries’ data privacy and confidentiality laws are also preventing regulators sharing data across borders. Australia and Singapore have agreed to allow their regulators mutual access to trading data stored in electronic warehouses in each country, in the first attempt globally to allow sharing of such information.
Full article on Financial Times (subscription required)