From January 2022, the European Securities and Markets Authority (ESMA) will become the supervisor of critical benchmarks administrators and data reporting service providers (DRSPs) in addition to the EU regulators’ current oversight of credit rating agencies, trade and securitization repositories, and systemic third country CCPs. In a recent speech, ESMA’s executive director, Natasha Cazenave, outlined the 2022 priorities and implications of data and tech.
The standardization and harmonization of reporting requirements have a clear objective – to allow entities to report the same information in the same way no matter which regulation they need to comply with. The use of globally agreed standards for identifiers such as LEI, UTI, ISIN and UPI is an essential part of it. An important qualitative improvement has come also from the use of ISO 20022.
“ESMA will continue building up its role as an EU capital markets data hub. The use of a big data solution and data analytics will leverage on the standardized data collected and will further enhance cooperation, coordination of priorities and timely follow up on identified supervisory issues,” she said in the speech.
Examples of how ESMA uses collected data are: data-driven policy making e.g., the MIFID review reports, clearing obligation, position limits, transparency calculations, etc; monitoring of risks to financial stability in the EU e.g., EMIR and SFTR data are an integral part of ESMA’s and NCAs toolboxes to monitor markets and support markets stability and integrity; market abuse/market integrity monitoring; assessing risks at macro levels – sectors, products, etc; assessing risks at micro levels – build-up of leverage, exposures and interconnectedness; – analyzing close links between derivatives and securities financing transactions (repo and IRS); and – looking into collateral transformation and velocity.
“ESMA is committed to further engage with market participants to discuss ways to streamline and simplify the reporting flows and requirements. ESMA is also willing to work together with relevant market participants to leverage on new technologies to develop alternative cost-effective ways in which data can be made available to authorities,” she said. These include developing suptech and regtech applications with tech such as: machine readable and executable regulations; distributed ledger technologies; and big data and artificial intelligence.