Rewrite of JFSA OTC Derivative Reporting Requirements
With the JFSA Rewrite to go-live on April 1st 2024, Cappitech has expanded its footprint into the Japanese market and has since been the leading solution domestically. We have gained important insights from actively engaging all market participants on this Rewrite, which may be helpful in your preparation for this significant change.
What are the expected changes?
The Japan Financial Services Agency (JFSA) is introducing a comprehensive regulatory framework that is set to revolutionize the financial industry in Japan. With a focus on transparency, compliance and risk management, these regulations align to the global OTC derivative reporting standards, and it represent a significant step forward in strengthening the financial industry in Japan. We cover these changes in depth in our previous JFSA Rewrite blog.
What are the challenges ahead?
The increased scope of reporting requirements, stricter risk management protocols and enhanced compliance obligations demand a significant shift in operational processes and infrastructure. In addition, market participants will need to find a solution to share Unique Transaction Identifier (UTI) between counterparties involved in the same transaction, to ensure consistency in reporting across multiple entities. Unique Product Identifier (UPI) is also something to keep an eye on, as it will be a requirement in the future.
Insights on how firms stay ahead of this change:
- Stay informed and updated: Regularly monitor official communications from the JFSA and the trade repository, including press releases, regulatory updates, and guidelines. By staying informed about the latest developments, you can proactively address any changes that may affect your regulatory reporting operations.
- Invest in technology: Consider adopting robust technology solutions that can streamline your compliance processes and automate regulatory reporting. These technologies can help you efficiently manage data, track changes in regulations, and ensure timely and accurate submissions to the JFSA.
- Implement robust data security measures: As regulatory changes may involve handling sensitive customer data, prioritize data security and privacy. Review your existing data protection measures and consider enhancing encryption, access controls, and regular security audits to safeguard against potential breaches.
- Establish a monitoring and auditing framework: Implement a robust monitoring and auditing system to track compliance with the new regulations continuously. Regularly review your processes, systems, and data to identify and rectify any deviations from the required standards.
- Collaborate with peer institutions and engage with experts: Engage through industry, Cappitech Working Group, and other financial institutions to share best practices and insights on how to prepare for the upcoming regulatory changes.
Some questions to consider while preparing for this change:
Structure, Framework and Governance:
- Planning: Have you factored budget, resources, project implementation timeline for next year’s work? And which are your priorities?
- Have you continued to engage Compliance, Operations, Technology and Business stakeholders in the delivery of project?
Build / Testing:
- Have you analyzed the impact of rewrite changes on your current workflow?
- Has there been sufficient time and resources set aside for UAT?
- Are all the rewrite changes incorporated within the test scenarios?
- How will data migration be managed?
- UTI Creation: Are you a UTI generator or a receiver or both?
- Do you have bilateral agreement in place or manage at contract level?
- Business Continuity Measures: Has there been considerations of What-Ifs scenarios?
- Have you engaged your industry peers and counterparties on this upcoming change?
- Have you planned on communications to both internal and external stakeholders?
How can Cappitech help?
With an in-depth understanding of the evolving regulatory landscape and a track record of delivering cutting-edge technology solutions, Cappitech is the leading partner of the Japanese financial industry. With the introduction of this Rewrite, financial institutions will need to invest in technology solutions that can streamline their reporting processes, ensure accurate data capture, and facilitate timely reporting to the regulator.
To ensure seamless localization, we have tailored our products and services to cater specifically to the Japanese market. We have established a local presence, enabling effective communication channels and localized customer support in Japanese. Additionally, apart from hosting local working group sessions, we have also introduced services to help Japanese clients trading with cross-border counterparts via leveraging our global connectivity services such as UTI-Connect. By collaborating with local partners, we have gained valuable insights into the unique needs and preferences of Japanese financial institutions, allowing for the customization and optimization of our offering.
Recognizing the importance of compliance and regulation, we have worked closely with Japanese authorities to ensure our solutions adhere to local regulations. This commitment empowers financial institutions to meet regulatory requirements efficiently, minimize risk, and maintain the highest standards of transparency.