Is the regulatory WORM turning?

Is the regulatory WORM turning?

Jeff Anderson

Compliance and Product Manager at Fidessa

Jeff is responsible for compliance and product management within Fidessa's derivatives business. He has substantial experience in managing a range of regulatory issues affecting the listed derivatives markets, with a unique perspective gained from holding senior compliance roles at both an exchange and a bank. As Director, Markets Advisory, for the Corporate and Institutional Banking division of RBS Securities Jeff was responsible for advisory compliance coverage for the bank's US futures trading and clearing business. Before that Jeff worked in the Department of Market Regulation at CME Group for more than 14 years, latterly as Senior Enforcement Counsel. While at CME, Jeff was involved in investigating trade practice issues and prosecuting CME Group rule violations.

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Is the regulatory WORM turning?

24.03.2017 12:30 pm

A week before President Trump’s inauguration the CFTC approved a proposal to amend the record keeping requirements contained in Regulation 1.31. The changes were an interesting precursor to the Trump administration’s call for a review of regulation in the financial services space.  

One of the significant changes in the proposal is the elimination of the requirement that electronic records be retained in a non-rewritable, non-erasable format, or, more succinctly, in a WORM (write once read many) compliant format. The proposal takes a more flexible, standards-based approach to regulatory record retention, with the focus on ensuring the “authenticity and reliability” of the records and record keeping system. Electronic records would need to be retained in systems that “maintain security, signature, chain of custody elements and data necessary to ensure the authenticity of the information contained in regulatory records.”

The CFTC noted in its proposal that record keeping processes have evolved over the years, including a transformation from paper-based systems to the storage of information electronically. The changes are designed to do away with outdated requirements while having the rule become technologically neutral, so that as technology develops, the rule will not become obsolete. It is always encouraging to see a regulator assess its requirements to make sure they conform to the pace of technological change and not hesitate to bury dated obligations. Moving forward with changes that aim to modernize and harmonize regulatory requirements with technical realities seems like a win-win proposition for both the regulator and the regulated. 

And it seems that, in the US at least, technology is not the only thing prompting a new approach to regulation. In his speech at the FIA conference in Boca Raton last week Christopher Giancarlo, the CFTC’s acting chair and Trump’s nominee for the permanent job, announced the launch of Project KISS (‘keep it simple stupid’), an agency-wide review of CFTC rules “that seeks to make them simpler, less burdensome and less costly”. Judging by the standing ovation that followed, this is just what the industry wanted to hear.

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