Six takeaways from firms interpreting and implementing MAS OTC derivative reporting rules

The final phase of MAS OTC derivative reporting, governing all asset classes across financial institutions and corporates, went live on 1 October 2021.

How are firms handling these new regulatory rules? We reached out to a large number of clients and prospects to gain an understanding. Their feedback provided insights into how to make the new processes more efficient and less painful.

Here are six takeaways, starting with how firms are analyzing the new requirements.

  1. A derivatives-reporting knowledge gap

Many, if not all, firms had a compliance or legal team to study and interpret the new rules and requirements. But, we noticed that many of those teams did not have familiarity with derivatives reporting, putting them at a subject-matter disadvantage. Most teams of this sort cover a wide range of compliance activities and may not have relevant experience to inform processes.

  1. Firms fall into two comfort zones

Firms appeared to fall into two distinct groups: ones that were more comfortable with the technology side of the new regulations and ones that found a “sweet spot” with compliance analysis. For example, firms that traditionally built internal solutions seemed to have a strong technology and operational outfit to translate regulatory requirements into codes and processes. Meanwhile, the other group of firms had compliance teams with experience in derivatives reporting, which eased interpretation of the requirements.

  1. External counsel vs specialized market vendor

After analyzing the regulations, firms tended to either seek external counsel for confirmation or engage the services of a specialized market vendor for validation. Based on the feedback we received, firms with the resources to do both often gained an advantage. An external counsel can define exact requirements, while market vendors operationalize what is needed.

Once firms pinpoint requirements, the next phase is to implement them. Solutions fell into three types:

(1) Report manually on spreadsheets

(2) Build a solution internally

(3) Purchase a market solution

Firms reported back after choosing their solution, shaping our next three takeaways:

  1. Spreadsheets are an option for some firms, but may exhaust resources

Typically, firms with less than a handful of transactions to report each day opted to manually report using spreadsheets. But some clients fitting this profile were actually happier purchasing a market solution because it left them the ability to focus resources on core business activities.

  1. Internal solutions work for some, but can be costly, unsustainable

Internally-built solutions are falling out of favor in today’s expensive and constantly-evolving landscape. Maintaining an in-house solution tends to be costly. And it can be unsustainable due to constant changes in regulations. That being said, some firms did opt to build their own solutions, preferring to retain control over the end design. But, during our conversations, they were very keen to hear what other firms were doing and to gain our best-practice insight.

  1. Firms offer tips on how to choose a market solution

Which brings us to selecting a market solution. An outside vendor can help firms focus on their core business, cut overall costs, and stay on top of regulatory changes.  Firms reported considering many points when assessing a market vendor, including:

  • Best fit for purpose
  • Ease of use
  • Adaptability
  • Scalability
  • Controls
  • Service and support
  • Cost

With firms still facing numerous regulatory changes—including the CFTC and JFSA rewrite of derivative reporting rules and the harmonization of critical data elements for MAS, ASIC, and HKMA—it’s critical to stay on top of developments in OTC derivative reporting.

As the market evolves, our experts can be a resource for your firm, both here in this space and through our regulatory reporting services. With more than 500 global implementations and countless conversations with clients and prospects, we’re constantly fine-tuning our solution to be effective and affordable based on real feedback from our client working groups—just like the six takeaways you’ve read.

Find out more from our experts.

Yuting Cai
About the author: Yuting Cai
Yuting serves as a Business Development Executive for IHS Markit’s Global Regulatory Reporting Solutions business. She is responsible for leading the expansion of the regulatory reporting capabilities in APAC. Previously, she worked in product management at MarkitSERV supporting customers in post-trade services and the compliance of G20 regulatory reporting.