Corporate Advisory

Staying ahead of Regulatory Change

All firms within and across financial services need to stay abreast of existing and emerging regulations that dictate what, how, when, and where they need to report about their activity. A major consideration for firms that are either global or that trade with counterparties outside their home jurisdiction is that regulations across regions are not harmonised and continue to evolve.

For instance, take the Derivatives reporting requirements. In the EU under EMIR for OTC Derivatives Trade reporting differs from the US requirements under the CFTC, which in turn is fundamentally different to proposed reporting requirements in the US under the SEC for reporting Securities Based Saps (regulation SBSR). Besides the granular details of which elements should be reported (or not), basic concepts such as which trade participant is required (or not) to report which essential data elements varies across regulatory regimes.

Besides these divergent requirements, new reporting regimes are on the near horizon, e.g. the aforementioned SEC Regulation SBSR, MIFIR/MiFID II, HKMA Phase II, and SFTR under ESMA. Additionally, existing regulatory reporting specs are going through second and third rounds of revision, e.g. ESMA implemented Level 2 for EMIR reporting last year and a new RTS/ITS was proposed in November 2015, and proposed changes to the CFTC RTS were issued for comments in December 2015.

OCREUS recommend that firms take a macro matrix approach to staying ahead of regulations. This means understanding the matrix of regulations, directives and legalisations along with dates that impact compliance decisions.

…And its not simply about pure compliance decisions. It’s the practical translation and implication of these rules which firms need to think about, their business, products and operating models. Its potentially transformational, however once firms then begin to tackle the wave of endless change across regulation by function the macro matrix approach can bring longer term benefit to their nearer term regulatory change and compliance programmes.