A Year in Review – 3 – Dodd-Frank Leads to Increased Data Requirements
It probably wasn’t the sexiest of issues to emerge during the US presidential campaign of 2012, but companies affected by Dodd-Frank kept an eagle-eye on debates in the run up to Election Day.
With Obama’s reappointment stamped for another four years, it’s safe to say Dodd-Frank is here to stay. Also known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (coming into law in July, 2010), many believe its real impact will be felt in 2013. The question on people’s minds however is what changes will occur before it comes into full effect?
2012 was meant to be the year all rules for implementation were finalized. However, in reality this has not been the case. The act itself is more than 800-pages long, not including the 398 rules that still need to be created. The slow (but steady) progress so far seems to have caused some frustration, even for longtime supporters.
For example – as of the beginning of this month – 237 of the 398 rulemaking requirements had missed their deadlines. Of the total rulemaking requirements, two thirds of them have been finalized or proposed whilst one third have yet to be proposed. Various sections of the act have also faced legal challenges and some rules have been struck down.
As well as this, some missed deadlines and issues with existing rules has given one of the regulatory bodies tasked with managing the implementation of Dodd Franks – the Commodity Futures Trading Commission – cause to issue more than 40 no-action letters providing extensions or exemptions from particular parts of the regulation. Whilst the ability to scrutinize regulation is important, the unfortunate offshoot of this is that the delay causes uncertainty for market players. Market players therefore need to figure out how they can best perform in this shifting environment.
Because there are increased data requirements that correspond with many of the Dodd-Frank regulations, companies are now facing the need to adjust their deadlines in order to be compliant on time.
Swap data requirements are a perfect example. Under Dodd-Frank, details of every swap transaction must be transferred to a registered swap data repository. Even though rules have been completed for this regulation, we have already seen that difficulties in their implementation have led to multiple no-action letters. This has moved the effective dates into 2013. This level of uncertainty is likely to continue well into the New Year as more kinks appear and need to be ironed out.
Further uncertainty will likely be felt for global trading companies as Markets in Financial Instruments Directive II (MiFID II) and European Market Infrastructure Regulation (EMIR) are implemented across Europe. While similar in goals to Dodd-Frank, the rules and data requirements could have enough differences to cause headaches for traders who play in both markets.
The best way to handle this risk is with a no-compromise, flexible data management solution. ZEMA is a best-in-class solution that will help you easily move through these uncertain times.
For more information I would recommend reading our blog post on Dodd-Frank Solutions and contact us for a demonstration on how we can assist you with meeting these complex data requirements.