Algorithmic Descriptions Regulation - White Papers

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Dodd-Frank Timeline, Feasibility Study on the Adoption of Standardized Computer-readable Algorithmic Descriptions
Proposal Date Comment Deadline Study Issued
December 9, 2010 December 31, 2010 April 7 2011

White papers and studies addressing algorithmic trading regulation.

CFTC/SEC: Joint Study on the Feasibility of Mandating Algorithmic Descriptions for Derivatives

April 7, 2011

One of the mandates of the Dodd-Frank Act was a requirement that the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) jointly study the feasibility and logistics of adopting standardized, computer-readable algorithmic descriptions to describe complex financial derivatives, and whether these descriptions, combined with "standardized legal definitions, may serve as the binding legal definition of derivative contracts."[1]

Staff concluded:

  • current technology is capable of representing derivatives using a common set of computer-readable descriptions. These descriptions are precise enough to use both for the calculation of net exposures and to serve as part or all of a binding legal contract.
  • before mandating the use of standardized descriptions for all derivatives, the following are needed:
    • a universal entity identifier and product or instrument identifiers,
    • a further analysis of the costs and benefits of having all aspects of legal documents related to derivatives represented electronically, and
    • a uniform way to represent financial terms not covered by existing definitions.
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CPSS/IOSCO: Final Report on OTC Derivatives Data Reporting and Aggregation Requirements - January 2012

January 2012

On January 17, 2012, the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) published their final report on the OTC derivatives data that should be collected, stored and disseminated by trade repositories (TRs). The final report builds upon a consultation report published August 24, 2011, which made the following recommendations:

  • Minimum data reporting requirements, including transaction economics, counterparty information, underlier information, operational data and event data;
  • Access to data, for entities such as market regulators, central banks, prudential supervisors and resolution authorities;
  • Methodology and mechanism for aggregation of data to include "Legal Entity Identifiers" ("LEIs");
  • International LEI development and principles to be determined and harmonized by regulators and industry participants; and
  • Development of a standard international product classification system.
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References

  1. CFTC-SEC delivers report on mandating algorithmic description for derivatives. CommodityOnline. Retrieved on April 11, 2011.

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