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Beyond Submission – Mastering Reconciliation for Defensible Derivative Reporting Oversight
In our journey through the complexities of derivative trade reporting, we’ve explored the critical role of robust governance and identified ASIC’s common “Blackspots.”
While implementing actionable strategies to address these pitfalls is vital, there’s a crucial layer of compliance that often receives less attention: effective reconciliation and oversight of delegated reporting.
For AFSL holders, simply ensuring your delegate submits data is not sufficient. While the ultimate responsibility for accurate, complete, and timely reporting stays with the Reporting Entity, ASIC’s guidance in RG 251.89 outlines a ‘best practice’ for oversight that many firms struggle with, whilst some firms may not have even been fully aware of.
Understanding ASIC’s Expectation (RG 251.89)
ASIC’s Regulatory Guide 251 (RG 251) provides clear, albeit sometimes understated, guidance on the level of oversight expected from Reporting Entities that delegate their reporting obligations. Specifically, RG 251.89 states:
“ASIC considers that best practice oversight by reporting entities involves accessing transaction, position, collateral, and valuation records directly from the trade repository to which a delegate is reporting. This direct access allows the reporting entity to perform reconciliations and checks against their own internal source data, rather than relying solely on the information provided by the delegate (or any chain of delegates). Furthermore, the delegate’s written agreement should clearly outline the approach to reconciliations to ensure the reporting entity’s obligations are met.”
This guidance is profound. It means that ASIC expects you, the Reporting Entity, to not just receive confirmation from your reporting partner, but to independently verify what has actually landed with the regulator. It’s about maintaining a robust “trust but verify” approach, ensuring that your firm retains full visibility and control over its compliance posture.
This expectation has been further amplified by the removal of the ‘safe harbour’ provisions in the ASIC Derivative Transaction Rules (Reporting) 2024 (RG 251.80-RG 251.82), meaning Reporting Entities now retain full, undiluted responsibility for their delegated reporting.
The Challenges of Traditional Reconciliation
For many firms, meeting the spirit of RG 251.89 can be a significant operational burden:
Manually pulling data from the Trade Repository, extracting internal source data, and comparing them field-by-field is time-consuming, resource-intensive, and prone to human error.
Establishing direct API connections to Trade Repositories and developing the internal infrastructure to ingest and process large volumes of TR data can be a substantial IT project.
For active traders, the sheer volume of daily transactions and positions makes manual or even semi-automated reconciliation impractical and resource consuming, especially given that ASIC expects oversight frequency to align with the magnitude of trading activity (RG 251.87).
Identifying discrepancies is one thing; efficiently pinpointing the root cause (e.g., source system error, mapping issue, TR rejection) requires specialised knowledge and tools.
Inefficiently consuming internal resources, dedicating compliance or operations staff to these granular reconciliation tasks diverts valuable personnel from other critical commercial activities.
These challenges often lead to firms relying solely on delegate-provided reports, inadvertently creating a “blind spot” in their oversight framework that ASIC explicitly advises against.
A Modern Approach to Oversight
To truly achieve defensible oversight with minimal internal effort, firms need a modern, technology-driven approach to reconciliation. This involves leveraging a reporting partner who can facilitate and automate the “best practice” outlined in RG 251.89:
1. Direct TR Data Ingestion
Your reporting partner should have the capability to pull your reported data directly from the Trade Repository, providing an independent feed of what ASIC sees.
2. Automated Tri-Party Reconciliation
The system should automatically reconcile three key data sets: your original source data, the data submitted by your partner, and the data confirmed by the TR. This ensures end-to-end accuracy.
3. Proactive Break Identification
The system should flag any discrepancies immediately, identifying missing trades, data mismatches, or rejections.
4. Actionable Reporting
You should receive concise, clear reports that highlight reconciliation status, details of any breaks, and their preliminary root cause, enabling quick review and decision-making by your compliance team.
5. Collaborative Remediation
Your partner should work with you to efficiently resolve any errors, guiding you through necessary data corrections and ensuring timely re-submission.
This approach transforms reconciliation from a reactive, manual burden into a proactive, automated control, empowering your firm to maintain robust oversight without significant internal investment.
What to Look for in a Reporting Partner
When evaluating a derivative reporting service provider, look beyond just their ability to submit data.
Prioritise partners who:
They should explicitly offer services designed to help you meet this best practice.
They should have the technical capability and service offering to perform reconciliation against data pulled directly from the TR.
You should have clear, transparent access to your reported data and reconciliation status, even if the operational heavy lifting is done by the partner.
Their service should be built around ensuring your compliance is not just achieved, but is also provable and auditable.
Their written service agreement should clearly outline the approach to reconciliations, ensuring alignment with RG 251.89 and supporting your firm’s oversight obligations.
In the evolving landscape of derivative trade reporting, regulatory expectations for oversight are clear.
ASIC’s RG 251.89 underscores that ultimate responsibility for accurate and complete reporting rests with the Reporting Entity, even when delegating.
By embracing a modern, automated approach to reconciliation and partnering with a service provider who understands and facilitates this “best practice,” firms can transform a potential compliance blind spot into a pillar of defensible, transparent reporting.
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