Will Distributed Ledger Technology Transform Transaction Reporting?
Authored by: Daniel Percy-Hughes, Principal Consultant, Business Consulting, Synechron
Efficient regulatory reporting is at the top of mind for most financial institutions, given the ever-growing, overlapping and more granular global regulatory requirements. In many operational areas, institutions are already turning to emerging and innovative technologies to improve processes, saving on both time and costs, while reducing errors due to the highly manual process many firms have in place.
Conceptually, transaction reporting is another area where there is potential for DLT to be applied to facilitate the efficient exchange of data between reporting stakeholders. There have already been some proven successes of the technology, such as the use of DLT for a UK mortgages transaction reporting solution with the FCA. A large number of individual banks, central banks and messaging networks have made no secret of their interest in DLT, testing the waters with various trials and POCs. Others, meanwhile, are looking at more bespoke options; exchanges are piloting the settlement and clearing of securities through a semi-private network, or offering the tokenisation of securities that would clear on its own DLT.
In the case of transaction reporting, firms are looking to solve problems concerning the accuracy and quality of data and matching within and between trade repositories. DLT has inherent features such its immutability and decentralized data structures shared peer-to-peer , that address reporting challenges, like transparency and accuracy of reported transaction data, reduced reporting costs, and can provide a holistic view of transactions without a lengthy reconciliation process. In DLT, you have the guarantee of control over your data and you know that your counterparty sees the same data you see. Smart contracts could be used to minimise the transfer of data while proving that a participant has satisfied their reporting obligation.