The complexity and cost of global efforts to improve the data quality of derivatives regulatory reporting create a variety of challenges for market participants and policy-makers.
These concerns – and the opportunity to mitigate them as major changes to reporting rules are implemented over the next two years – have become a powerful impetus behind digital regulatory reporting (DRR) initiatives. Broadly defined, DRR refers to the publication of reporting rules by regulators and/or the implementation of derivatives reporting requirements by market participants via human-readable, machine-executable code.
DRR will allow regulators to publish reporting rules as executable code that can be automatically read and interpreted by the IT systems of reporting entities, improving the reporting process across asset classes. Regulated entities will be able to automatically execute new and amended regulatory reporting rules using an industry-led standardized interpretation of the requirements as free open-source code.
This paper explains what DRR is, reviews its potential benefits and describes the various initiatives that are under way. In particular, the paper highlights the work of ISDA and market participants to enable all firms to implement regulatory reporting rules consistently using the open-source Common Domain Model. The paper also describes several DRR initiatives launched by policy-makers that involved collaboration with market participants.