CME Group to Scale Back Regulatory Reporting Business

CME Group will wind down several of its regulatory reporting services on or by Nov. 30, 2020, following a review that found the services no longer align with the exchange operator’s business direction.

The decision follows the exchange’s acquisition of NEX Group in November 2018 and Acquis Exchange’s approval from the UK regulator to acquire NEX exchange in March 2020.

“Following an evaluation of our business portfolio … we have made the decision to wind down our Abide Financial and NEX Regulatory Reporting businesses, and our European and Australian Trade Repositories by 30 November 2020,” CME Group said in a statement provided to WatersTechnology.

However, CME will retain the US (CFTC) Swap Data Repository and Canadian Trade Repository services. In the coming months, CME will work with clients and regulators “to ensure a smooth transition and orderly wind-down of the impacted services,” the statement continued. This will include moving business operations and reporting data to other reporting vendors and trade repositories. CME’s regulatory reporting filing specifications cover the requirements of Mifid and the European Market Infrastructure Regulation (EMIR), the Securities Financing Transaction Regulation (SFTR), the Australian Securities and Investments Corporation (ASIC), and the Monetary Authority of Singapore (MAS).

The scale-back will inevitably lead to redundancies within the businesses, says a CME spokesperson, but they will be subject to a consultation period. The spokesperson added the move is unrelated to the ongoing Covid-19 pandemic, and that it was simply a business decision—which “wasn’t taken lightly”—made by the parent group.

Clients of the services will have to consider where to transition their reporting functions in the coming months. This will be a significant challenge considering the amount of historic reporting data that will have to be transferred over, as well as due to the large market share owned by CME, says Ronen Kertis, CEO of Cappitech, a provider of regulatory reporting solutions and services.

“The CME has 38% global volume of market share, and was responsible for about 40% of trade reporting by volume, so the shift to other players will be significant and will require those trade repositories to be prepared for additional clients and higher volumes of data,” Kertis says.

The transition will also be technically challenging, and invites risk regarding data errors and misinterpretation of reports, Kertis adds. The timeliness of reporting may also be impacted.

This comes as regulations such as SFTR will come into force this July, after being pushed back three months by EU and UK regulators due to coronavirus disruption.  

Other considerations include the transfer of personal data in Mifid II reporting and transferring client data to new systems.

“Mifid will have its own challenges,” Kertis says. “As there is personal data involved, firms will need to look for a solution that cannot only handle their transition in a smooth fashion, but that also has the technology and processes in place to ensure their clients’ and employees’ personal data are kept at the highest security standards.”