ESMA to tackle trade repository data quality in 2016
The European Securities and Markets Authority (ESMA) has published its 2016 supervisory priorities for credit rating agencies (CRAs) and trade repositories (TRs).
The regulatory authority reports seeing a number of changes in the CRA and TR industries during 2015, with new applicants for registration in both sectors, and current authorised entities seeking to develop their businesses.
This has included CRAs providing credit ratings on new asset classes or in new geographic areas, and TRs offering trade reporting services for other instrument types. ESMA identifies its supervisory priorities on the basis of risk assessment exercises conducted throughout the year. In 2015 these identified high levels of governance and strategy risk, and operational risk in the CRA industry and high levels of risk associated with TRs’ data and systems.
In 2016 ESMA will focus its supervisory activities on:
- CRA governance and strategy and the quality of credit ratings;
- TR data quality and data access;
- Fees charged and information security for all supervised entities.
Steven Maijoor, ESMA’s Chair, said, “The credit rating and trade repository industries continue to evolve and develop. We are receiving new applications for registration and existing entities are seeking to develop their businesses by expanding into new areas. ESMA supports these developments where they contribute to the maintenance of stable and orderly financial markets.
“For this reason, in 2016 ESMA will focus its work on the quality of the services being provided by supervised entities. This means we will concentrate on issues surrounding CRA governance, strategy and ratings quality, along with data quality and access to TRs’ data with a broad focus on the fee structures and information security in both industries.”
TR supervision focused on in 2015 related to the quality of TRs’ data, access to data held by TRs and the operation and performance of TRs’ systems. ESMA worked with TRs to implement the data quality action plan established in September 2014 including:
- Harmonising TRs’ data validation;
- Monitoring the inter-TR reconciliation process; and
- Ensuring the harmonisation of the aggregate data made available on TRs’ websites.
ESMA has also been monitoring National Competent Authorities’ (NCAs) access to TR data. It has entered into a number of memoranda of understanding to help third-country regulatory authorities access TR data. It is developing an IT system to allow NCAs to submit data queries through a centralised web portal.
There are six TRs registered in the EU and two further applications are being reviewed. By the end of 2015 almost 27 billion reports had been received by TRs, with an average of 330 million trade reports being submitted each week.
Reported by Dan Barnes
