The Luxembourg branch of global accounting giant Deloitte has developed a proof of concept for regulatory transaction reporting via a blockchain or as it is otherwise referred to, Distributed Ledger Technology (DLT). Deloitte is addressing with this solution current and future regulatory challenges of OTC transaction reporting from EMIR to MiFIR and SFTR.
“Distributed Ledger Technology offers a world of new opportunities when it comes to trade, post trade and related regulatory reporting. Thanks to smart contracts and DLT, the quality and transparency of reported transaction data will increase and the reporting costs will be substantially reduced,” explains Laurent Collet, Partner at Deloitte Luxembourg. “With a DLT solution, the transaction data will be readily available to the trade repositories and regulators in a unified form and there will no longer be any need for time-consuming reconciliation.”
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In June, the European Securities and Markets Authority (ESMA) published a discussion paper on the potential benefits and risks of blockchain technology to securities markets. This proof of concept should help both regulated entities and regulators answer the questions raised by ESMA regarding relevant regulatory reporting activities.
Deloitte suggests a brand new process for transaction reporting. The counterparties of the transaction will seal and report their deal using a smart contract, whose terms include all the aspects needed for the transaction reporting. The regulators will be able to control and monitor the transaction data and their daily updates, which are stored in the distributed ledger. Deloitte sees its role in the process as supporting counterparties as their agent in validating their data and in setting up and monitoring the smart contracts.
“With this proof of concept we explore a new paradigm in which distributed ledger technology does not disintermediate incumbents but rather proposes a far more efficient and lean processing of regulatory reporting using proofs of process and tokenized transaction reports. By combining this solution with developments undertaken by other Deloitte member firms, we are able to propose to our clients an ever growing DLT-based ecosystem of solutions for the financial services industry, demonstrating the combined strengths of our global networks of industry and technological specialists,” concludes Thibault Chollet, Director and Blockchain Leader at Deloitte Luxembourg.