SEC and CFTC published joint study on the feasibility of mandating algorithmic descriptions for derivatives
07 April 2011
Based on the public input, staff investigation and analysis, the joint study concludes that current technology is capable of representing derivatives using a common set of computer-readable descriptions.
The Commissions’ staff study also concludes that before mandating the use of standardised descriptions for all derivatives, the following are needed: a universal entity identifier and product or instrument identifiers, a further analysis of the costs and benefits of having all aspects of legal documents related to derivatives represented electronically, and a uniform way to represent financial terms not covered by existing definitions.
To that end, in the Commissions’ staff view, standardised computer-readable descriptions are feasible for at least a broad cross-section of derivatives. The joint study contemplates that other financial regulators and the US Treasury’s Office of Financial Research, along with the Commissions’ staff, may engage in a series of public-private initiatives to foster collaboration between regulators and the derivatives industry, working towards representing a broader cross-section of derivatives in computer-readable form.
The Commissions thank the many members of the derivatives industry and public that provided information for the joint study and thank the responsible staff at both the Commodity Futures Trading Commission and the Securities and Exchange Commission for their collaborative efforts. The CFTC staff responsible for the CFTC's participation in the joint study process are: Andrei Kirilenko, Chief Economist and Study Team Lead, JonMarc Buffa; Nancy Doyle, Frank Fisanich, Irina Leonova and John Paul Rothenberg. SEC staff responsible for the SEC's participation in the joint study process include members of the Division of Risk, Strategy and Financial Innovation and the Division of Trading and Markets, and the Office of Compliance, Inspections and Examinations, the Office of General Counsel and the Office of International Affairs.
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