Dealers said they are not complying fully with European and US derivatives reporting rules in cases where a counterparty is subject to privacy laws that prevent its identity being revealed to third-country regulators. In these cases, banks say they are reporting all the other information required by EU and US rules, but are masking the counterparty details. The US has offered relief to 16 jurisdictions through two no-action letters, but this expires on June 30 and – of those countries – only Singapore has said it is working to change its laws. European regulators, meanwhile, are insisting that key identifying information, including the 20-character, counterparty-specific legal entity identifier, must be included in trade reports.
"I think there is a lot of pressure to make sure those jurisdictions are given some time – but not too much time, because it makes for an unlevel playing field", said Stephens speaking at an investment management conference in New York. Supervisors in the US and Europe, along with Canada, are part of the OTC Derivatives Regulators Group (ODRG), an international forum for discussion and co-ordination of national and regional swap market reform efforts.
"The ODRG has consistently voiced that legal changes need to be made in order to allow these market participants – the banks, basically – to respect the rules of their jurisdiction. The US has given some no-action letters but the Europeans are holding hard and fast. So this is a very important issue, especially for some of the Asian countries, to allow for a transitional period. You can't just change a law overnight – there is a lot of history behind it", added Stephens.
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