April 30, 2013
The TAC meeting will come to order.
I would like to welcome our TAC members, members of the Subcommittee on Data Standardization and other guests and thank them for joining us here today.
Today, the TAC will receive testimony on several significant issues.
Big Data Is Our Big Challenge – Committing the TAC to Help Solve It
The main topic we will focus on today is swap data reporting. Much like Thomas Edison’s sentiment that “the value of an idea lies in the using of it,” the value of data lies in using it. In other words, it is one thing for swap data reporting to be mandated by Dodd-Frank and Commission regulations, and quite another for it to be flowing properly from reporting entities to SDRs, and from there for the Commission to efficiently access and utilize it. I want the TAC to work to help solve these challenges.
On the first data panel we will have representatives of firms from various areas of the market, each giving a perspective on their compliance with Commission data reporting rules and their interconnection with SDRs. The second panel will consist of representatives from the SDRs. Our Division of Market Oversight (DMO) and Office of Data and Technology (ODT) staff have jointly developed a list of priority issues for SDRs, which will guide the discussion and which the SDR representatives will address. The third panel related to data will be a presentation by Tradeworx to help us look to the potential of technology to deal with big data.
As we go through these panels, I want you to think of the various tools we need and that we can harness in order to address the challenges of swap data reporting. For example, I have called for a cross-divisional data unit with staff dedicated full-time to organizing and examining data for completeness and accuracy, interpreting and analyzing the data, and developing the necessary analytical tools to identify market risk. Another potential tool would be the development of a written “Guidebook” to articulate specific instructions to market participants and SDRs in order to make the data reporting process more consistent and efficient. We already have a guidebook in another reporting context: large trader swaps reporting under Part 20 of the Commission’s regulations. Developing the Part 20 guidebook was by no means quick or easy, and Part 20 reporting is on a much smaller scale than SDR reporting. But both the end result and the process, which featured extensive interaction between the Commission and market participants, have been instrumental in getting the reporting system up and running. I would hope for similar gains with SDR reporting.
I fully expect the TAC’s focus on SDR/data issues to continue well beyond today’s meeting. We will continue to refine our priorities for reporting in order to reach the most effective and efficient ways to collect, manage and utilize data to best effect. These are big challenges, and I will continue to commit the TAC’s attention and resources to help solve these big challenges.
Updates on Customer Protection Technology Solution and Commission Rules 1.73/1.74
Before we get to the data reporting panels, we will receive updates on two topics we have discussed in previous TAC meetings.
First, we will hear from CME Group and NFA on the status of their customer protection technology solution to verify and reconcile the account balances claimed by futures commission merchants (FCMs) and custodian banks. As you will recall, these measures were initiated at our emergency TAC meeting last July 26 in response to the Peregrine Financial Group debacle, and we also held a discussion on this at our October 30 meeting. Since then, the technology solution has been launched and much progress has been made. Today, I want to follow up on that progress and discuss the next steps for linking other customer accounts. This panel will also include a presentation by AlphaMetrix, which has worked with CME and NFA to develop this system.
Second, we will receive an update from FIA on the status of compliance with Commission Rule 1.73, relating to pre-trade credit checks, and Rule 1.74, relating to the timing for acceptance/rejection of clearing.
Last Week’s Twitter Attack – Social Media and Markets
Last but not least, I have added a session to the agenda to focus on last week’s Twitter attack and the market reaction to that event. This is something that needs discussing, and what better place to do that than in a room full of technology experts. Rather than apply the “shoot first, aim later” strategy, I am going to have an open discussion with the TAC members – including the exchanges where the market reaction to this hacking played out – to understand the implications, concerns, and possible solutions. The social media genie is out of the bottle and rather than attempt the impossible in trying to put the genie back in the bottle, we need to begin figuring out how markets and regulators will respond to this new market force.
Again, I am grateful for everyone’s attendance and participation here today. Let’s begin with our panels.
Last Updated: April 30, 2013