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Key takeaways from recent MAS updates to OTC derivative reporting guidelines and FAQs

MAS Rewrite - New Guidance released by MAS

Topic

MAS updates its OTCD reporting guidelines and FAQs

 

Date

New requirements commence 21 October 2024

 

Level of significance of change

High

 

Main points

MAS has released updated documentation – Guidelines and FAQs to aid in the implementation of the new reporting requirements for OTC derivatives which commences on 21 October 2024.

MAS has essentially adopted IOSCO’s technical guidance on the reporting of data fields relevant to OTC derivatives with emphasis on Unique Transaction Identifiers (UTIs), Unique Product Identifiers (UPIs) and other crucial data fields.

The move by MAS is in line with other global regulators looking to achieve harmonisation across jurisdictions of reportable data components.

The changes to OTC derivative transaction reporting requirements are significant so we encourage all firms to commence their preparations for implementation as soon as possible.

 

What do I need to do?

Firms with MAS reporting obligations should start with the following steps to move their preparations forward ahead of the Go-Live Date of 21 October 2024:

  • Make sure the regulations, FAQs and Guidelines you are using as part of your MAS Rewrite preparations are the final amended regulations that have been published (see below for the links).
  • Check and confirm that your firm is using the latest field specifications released by the trade repository (DTCC) and MAS.
  • Consider if your firm can generate and read reports in XML. If not, consider what other firms or resources you will need to engage in order to do so.  Read our article – Why is XML so hard?
  • Ensure your firm has the information under the new field specification and where such information is not held, determine where you need to obtain it from e.g. from counterparties, ANNA-DSB for UPIs, client disclosure letters and agreements.
  • Get prepared to generate or obtain UTIs and share/retrieve these with/from counterparties.
  • Firms should monitor the number of derivative contracts which may fall into the “re-reportable” category and consider the changes to the reportable data fields e.g. will there need to be major changes to current processes and technological infrastructure.

How does this change my reporting?

The changes to the reporting regime which commence on 21 October 2024 are vast, however we cover a few of the major points below.

  • Unique Transaction identifiers (UTIs)

UTIs will need to be generated and reported and there is scope under certain circumstances for interim UTIs to be used. UTIs reported will need to be specific for the relevant derivative and if the derivative needs to be reported more than once e.g. under another jurisdiction or due to SF(RDC)R requirements, then it should be consistently applied. There should only be one entity as the UTI generating entity. Note Table 1 within the Guidelines sets out parameters in relation to the generation of UTIs. Further, there also now needs to be policies and procedures put in place by specified persons around the generation and obtaining of UTIs.

  • XML Schema Reporting

Reporting needs to be done using an XML template following the ISO 20022 methodology. Please see our earlier newsletter detailing the intricacies of using the XML methodology for transaction reporting here.

  • Unique Product Identifiers (UPIs)

Reporting entities are to report a global UPI as provided by the Derivatives Services Bureau Ltd – this can either be obtained from the ANNA-DSB database or created.  Some firms may be able to obtain the relevant UPI from the counterparty to their trade. Information relevant to instrument type and characteristics along with underlier components are still required to be reported.

  • Reportable data fields

The main areas of change in the First Schedule to the Revised Regulations to take note of are in the following data fields:

  • 15 – Contract information – Underlying (thing to the contract))
  • 29 – Contract information – Option style
  • 130 (Payment – Other payment date).

Other things to note:

  • If there is no collateral agreement in place or no collateral/margin has to be posted then “UNCL” in the “Collateralisation category” field should be reported and other collateral and margin data fields would be inapplicable.
  • Reporting of collateral/margin information at a portfolio level is permitted where the derivatives contract forms part of a group of contracts where margined together (net or gross basis). In such instances, the “Collateral portfolio indicator” field should have “True” and other collateral and margin fields can be reported on a portfolio basis.
  • Re-reporting requirements of derivatives contracts

If a derivative is re-reportable under the Revised Regulations, i.e. it has a maturity date on or after 21 April 2025, the specified person will have to re-report (using the same UTI as before) the execution in accordance with the new format under the Revised Regulations by 21 April 2025.

 

More about the documents released

The final revised OTC derivatives reporting regulations have been released by MAS. The amendment to the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013 (“SF(RDC)RN)” (the “Revised Regulations”) is available here.

Guidelines and further explanation in relation to the Revised Regulations can be found here. These Guidelines and Revised Regulations take effect on 21 October 2024 (“Go-Live Date”). The changes will ultimately impact MAS OTC derivatives reporting as of the Go-Live Date.

Updated FAQs were also published to aid implementation of the reporting obligations and elaborate on MAS’ intent for some of the requirements set out under the Revised Regulations i.e. there are updated relevant questions which come into play after 21 October 2024. The FAQs are available here.

The Guidelines focus on the creation and reporting of UTIs, re-reporting requirements of derivatives contracts and reportable data fields.

 

Links

 

Article Author:

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Sophie Gerber

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Sophie Gerber

Sophie is co-CEO and founder of TRAction and focuses on assisting clients in Australia, Europe and Asia to meet their regulatory requirements with trade and transaction reporting solutions as well as development of the best execution platform. She has extensive experience in providing compliance and legal services to Australia’s financial services and credit participants. Her vast experience coupled with in-depth knowledge of business practicalities, regulatory compliance and financial services laws allow her to effectively and efficiently engage with clients.