www.finextra.com Open in urlscan Pro
94.236.38.249  Public Scan

Submitted URL: https://cw06004.na1.hubspotlinksstarter.com/Ctc/I6+113/cW06004/VW-VNR4ytk00W29H1H36D62r1VmLt1V5nVVL4N5yXtkd5jMY8W69t95C6lZ3p0W708vpf6hB3ZDW8...
Effective URL: https://www.finextra.com/blogposting/27246/digital-regulatory-reporting-drr---your-compliance-satnav-and-regulatory-lane-...
Submission: On November 27 via api from UA — Scanned from PL

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                  <h1>Digital Regulatory Reporting (DRR) - your compliance SatNav and regulatory lane assist</h1>
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                    <p style="margin-top:0pt; margin-bottom:0pt"><em><span style="font-size:11pt; font-family:Arial,sans-serif">Digital Regulatory Reporting can ensure that you adopt common interpretations of the regulations.&nbsp; Like lane assist
                          in cars today, DRR will keep you on track and sound an alarm if you begin to stray off course.</span></em></p>
                    <p style="margin-top:0pt; margin-bottom:0pt">&nbsp;</p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><strong><span style="font-size:11pt; font-family:Arial,sans-serif">Destination compliance</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">As is well understood by now, the only constant in regulatory compliance is that regulation updates
                        endlessly.&nbsp; For global firms operating across different regulatory jurisdictions, the job of adapting to changing rules is never complete. Just as a firm becomes compliant in one new regime, one of their other
                        jurisdictions is facing changes.&nbsp;&nbsp;</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">And on the cycle goes, leaving financial firms with heightened levels of complexity and higher costs of
                        compliance than ever before.&nbsp;</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">In today’s world of regulatory compliance, the word ‘destination’ is somewhat paradoxical, as compliance is
                        an ongoing journey, not a fixed endpoint.&nbsp; Meanwhile all of the firm’s stakeholders are increasingly risk-averse and prefer to take the journey with the drivers who have the best SatNav and modern driver assists which add
                        additional guardrails, lest they end up lost with no 5G signal.&nbsp;<br>
                        <br>
                      </span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><strong><span style="font-size:11pt; font-family:Arial,sans-serif">Unpacking compliance complexity&nbsp;</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Regulation is of course completely necessary. It is vital to protecting the environment and the economy
                        itself, as well as safeguarding the interests of investors, consumers, counterparties, employees and so on.&nbsp; With emerging technologies, new methods of transacting business in the capital markets and a shifting
                        geopolitical landscape, regulation must evolve to remain fit for purpose. Bodies such as the UK FCA have become more data-driven and much more open to discussion with the entities and markets it regulates, meaning regulation
                        is becoming more collaborative and in theory, more proportionate.&nbsp;</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">When updating compliance, or replacing their reporting systems, firms, even large ones with in-house teams
                        and large budgets, struggle.&nbsp; In fact, the bigger the firm is, the more compliance it faces, and in satisfying multiple different frameworks, the chances that relevant rules will be updated, skyrocket.</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">More established firms have legacy compliance systems which they are trying to adapt to changing regulatory
                        challenges in existing markets, or scale across new global jurisdictions. All are looking for a much more sustainable, future-proof system to achieve and maintain compliance and reporting.&nbsp; Given the complexity of modern
                        compliance standards, today’s firms also seek reassurance that their interpretations of these rules are accurate. Only then can they assess if they are just meeting compliance, adhering to best practices, or outperforming and
                        doing too much to meet regulation, allowing them to free-up precious resources for deployment elsewhere.&nbsp;</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">But a common mantra amongst all of the compliant firms now is:<br>
                        <br>
                      </span><strong><span style="font-size:11pt; font-family:Arial,sans-serif">I’m up to date! Now, what’s next?</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Just looking at the 2025 regulatory horizon and the foreseeable beyond, Canada, Hong Kong and Switzerland
                        will shortly see major changes to their rules. Updates to the Markets in Financial Instruments Regulation (MiFIR), Markets in Financial Instruments Directive (MiFID) and Commodity Futures Trading Commission regulations (CFTC
                        3.3) are all in process as we speak.&nbsp; Updates to the UK European Market Infrastructure Regulation (EMIR) will occur, as well as changes to its European counterpart.&nbsp;</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">So whether you are an industry giant, or a new challenger in the space, nobody finds compliance ‘easy’.<br>
                        <br>
                      </span><strong><span style="font-size:11pt; font-family:Arial,sans-serif">Digital Regulatory Reporting to the rescue</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Digital Regulatory Reporting (DRR) is the industry framework from the International Swaps and Derivatives
                        Association (ISDA) aiming to digitise, standardise and automate regulatory reporting for derivatives transactions.&nbsp;</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">For those more technically-minded out there, DRR is a project to distribute a set of Java libraries,
                        implementing a free-to-use industry standard reporting and validation logic, to ease reporting in various jurisdictions in their appropriate formats.</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">To standardise regulatory reporting, DRR uses the Common Domain Model (CDM) - a standardised,
                        machine-readable blueprint for how derivatives transactions are represented, processed and managed across the lifecycle of a trade. <br>
                        <br>
                      </span><strong><span style="font-size:11pt; font-family:Arial,sans-serif">What does DRR do?</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">DRR delivers an array of benefits. Crucially, it provides a standardised interpretation of regulatory
                        requirements to ensure consistency across firms. It improves efficiency and reduces costs by eliminating the need for individual reporting interpretations. DRR enhances data accuracy and transparency, making compliance easier,
                        while also allowing quick regulatory updates. Additionally, it supports automated machine-executable reporting and is designed to integrate with existing systems, ultimately helping firms meet regulatory expectations more
                        effectively.<br>
                        <br>
                      </span><strong><span style="font-size:11pt; font-family:Arial,sans-serif">DRR is your benchmark&nbsp;</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Whilst DRR is an incredibly helpful framework for firms of all sizes, some of the very largest firms, that
                        have chosen to tackle regulation in-house (using significant resource), are still finding DRR useful as a compliance benchmark - a way to check their regulatory ‘homework’ to make sure that they are in line with best practice
                        - once again, it is the common interpretation of the regulations which offers these extremely large institutions extra comfort that they ‘got it right’. <br>
                        <br>
                      </span><strong><span style="font-size:11pt; font-family:Arial,sans-serif">What is the most efficient way to implement DRR</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Implementing the CDM and DRR frameworks can be simplified by the following key steps.&nbsp;</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Heads of Regulatory Reporting can start by thoroughly understanding DRR and CDM’s structures and data
                        requirements using resources from </span><a href="https://www.isda.org/" style="text-decoration:none"><span style="font-size:11pt; font-family:Arial,sans-serif; color:rgb(0,0,0); text-decoration:underline">ISDA</span></a><span
                        style="font-size:11pt; font-family:Arial,sans-serif"> and
                      </span><a href="https://www.finos.org/" style="text-decoration:none"><span style="font-size:11pt; font-family:Arial,sans-serif; color:rgb(0,0,0); text-decoration:underline">FINOS</span></a><span
                        style="font-size:11pt; font-family:Arial,sans-serif">. DRR is distributed as a set of Java code libraries by ISDA. DRR's Java libraries provide core regulatory logic and freely available examples showing how to generate and
                        validate reports.</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Firms should develop appropriate CDM objects, as DRR requires CDM representation for trades and business
                        events. Consider running a Proof-of-Concept (POC) project to generate valid CDM data from your sources before applying DRR logic.</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">It would also be useful for firms to think strategically about CDM's potential for other use cases beyond
                        DRR, such as event standardisation and collateral management.</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Firms can also invest in third-party data validation and quality assurance. By implementing automated testing
                        and validation processes using CDM and DRR functions, accuracy can be ensured and reporting mismatches prevented.<br>
                        <br>
                      </span><strong><span style="font-size:11pt; font-family:Arial,sans-serif">Trust DRR to keep you in the right lane&nbsp;</span></strong></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Whether you are a large organisation or just getting started in derivatives trading, Digital Regulatory
                        Reporting is excellent assistance, signposting your route to compliance, making sure everyone is adhering to the same rules of the road, and even providing the warning signals when you slightly stray off course.</span></p>
                    <p style="line-height:1.2; margin-top:0pt; margin-bottom:4pt"><span style="font-size:11pt; font-family:Arial,sans-serif">Smart drivers should be downloading this ‘app’ to their dashboards now.</span></p>
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 4. Digital Regulatory Reporting (DRR) - your compliance SatNav and regulatory
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DIGITAL REGULATORY REPORTING (DRR) - YOUR COMPLIANCE SATNAV AND REGULATORY LANE
ASSIST

3 Likes 2 20 November 2024 Be the first to comment
Marc Gratacos
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Digital Regulatory Reporting can ensure that you adopt common interpretations of
the regulations.  Like lane assist in cars today, DRR will keep you on track and
sound an alarm if you begin to stray off course.

 

Destination compliance

As is well understood by now, the only constant in regulatory compliance is that
regulation updates endlessly.  For global firms operating across different
regulatory jurisdictions, the job of adapting to changing rules is never
complete. Just as a firm becomes compliant in one new regime, one of their other
jurisdictions is facing changes.  

And on the cycle goes, leaving financial firms with heightened levels of
complexity and higher costs of compliance than ever before. 

In today’s world of regulatory compliance, the word ‘destination’ is somewhat
paradoxical, as compliance is an ongoing journey, not a fixed endpoint. 
Meanwhile all of the firm’s stakeholders are increasingly risk-averse and prefer
to take the journey with the drivers who have the best SatNav and modern driver
assists which add additional guardrails, lest they end up lost with no 5G
signal. 



Unpacking compliance complexity 

Regulation is of course completely necessary. It is vital to protecting the
environment and the economy itself, as well as safeguarding the interests of
investors, consumers, counterparties, employees and so on.  With emerging
technologies, new methods of transacting business in the capital markets and a
shifting geopolitical landscape, regulation must evolve to remain fit for
purpose. Bodies such as the UK FCA have become more data-driven and much more
open to discussion with the entities and markets it regulates, meaning
regulation is becoming more collaborative and in theory, more proportionate. 

When updating compliance, or replacing their reporting systems, firms, even
large ones with in-house teams and large budgets, struggle.  In fact, the bigger
the firm is, the more compliance it faces, and in satisfying multiple different
frameworks, the chances that relevant rules will be updated, skyrocket.

More established firms have legacy compliance systems which they are trying to
adapt to changing regulatory challenges in existing markets, or scale across new
global jurisdictions. All are looking for a much more sustainable, future-proof
system to achieve and maintain compliance and reporting.  Given the complexity
of modern compliance standards, today’s firms also seek reassurance that their
interpretations of these rules are accurate. Only then can they assess if they
are just meeting compliance, adhering to best practices, or outperforming and
doing too much to meet regulation, allowing them to free-up precious resources
for deployment elsewhere. 

But a common mantra amongst all of the compliant firms now is:

I’m up to date! Now, what’s next?

Just looking at the 2025 regulatory horizon and the foreseeable beyond, Canada,
Hong Kong and Switzerland will shortly see major changes to their rules. Updates
to the Markets in Financial Instruments Regulation (MiFIR), Markets in Financial
Instruments Directive (MiFID) and Commodity Futures Trading Commission
regulations (CFTC 3.3) are all in process as we speak.  Updates to the UK
European Market Infrastructure Regulation (EMIR) will occur, as well as changes
to its European counterpart. 

So whether you are an industry giant, or a new challenger in the space, nobody
finds compliance ‘easy’.

Digital Regulatory Reporting to the rescue

Digital Regulatory Reporting (DRR) is the industry framework from the
International Swaps and Derivatives Association (ISDA) aiming to digitise,
standardise and automate regulatory reporting for derivatives transactions. 

For those more technically-minded out there, DRR is a project to distribute a
set of Java libraries, implementing a free-to-use industry standard reporting
and validation logic, to ease reporting in various jurisdictions in their
appropriate formats.

To standardise regulatory reporting, DRR uses the Common Domain Model (CDM) - a
standardised, machine-readable blueprint for how derivatives transactions are
represented, processed and managed across the lifecycle of a trade.

What does DRR do?

DRR delivers an array of benefits. Crucially, it provides a standardised
interpretation of regulatory requirements to ensure consistency across firms. It
improves efficiency and reduces costs by eliminating the need for individual
reporting interpretations. DRR enhances data accuracy and transparency, making
compliance easier, while also allowing quick regulatory updates. Additionally,
it supports automated machine-executable reporting and is designed to integrate
with existing systems, ultimately helping firms meet regulatory expectations
more effectively.

DRR is your benchmark 

Whilst DRR is an incredibly helpful framework for firms of all sizes, some of
the very largest firms, that have chosen to tackle regulation in-house (using
significant resource), are still finding DRR useful as a compliance benchmark -
a way to check their regulatory ‘homework’ to make sure that they are in line
with best practice - once again, it is the common interpretation of the
regulations which offers these extremely large institutions extra comfort that
they ‘got it right’.

What is the most efficient way to implement DRR

Implementing the CDM and DRR frameworks can be simplified by the following key
steps. 

Heads of Regulatory Reporting can start by thoroughly understanding DRR and
CDM’s structures and data requirements using resources from ISDA and FINOS. DRR
is distributed as a set of Java code libraries by ISDA. DRR's Java libraries
provide core regulatory logic and freely available examples showing how to
generate and validate reports.

Firms should develop appropriate CDM objects, as DRR requires CDM representation
for trades and business events. Consider running a Proof-of-Concept (POC)
project to generate valid CDM data from your sources before applying DRR logic.

It would also be useful for firms to think strategically about CDM's potential
for other use cases beyond DRR, such as event standardisation and collateral
management.

Firms can also invest in third-party data validation and quality assurance. By
implementing automated testing and validation processes using CDM and DRR
functions, accuracy can be ensured and reporting mismatches prevented.

Trust DRR to keep you in the right lane 

Whether you are a large organisation or just getting started in derivatives
trading, Digital Regulatory Reporting is excellent assistance, signposting your
route to compliance, making sure everyone is adhering to the same rules of the
road, and even providing the warning signals when you slightly stray off course.

Smart drivers should be downloading this ‘app’ to their dashboards now.

EXTERNAL

This content is provided by an external author without editing by Finextra. It
expresses the views and opinions of the author.

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Marc Gratacos
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