On 5 September 2022, the FCA published a Dear CEO letter being its first portfolio letter to trade repositories and securitisation repositories (which the FCA refers to collectively as ‘Repositories’).
The Dear CEO letter outlines the FCA’s view of the key risks of harm in the Repositories portfolio and communicates what the regulator expects Repositories to do to minimise potential risks to market integrity resulting from failures to meet their own regulatory requirements or failures to facilitate their customers meeting their UK reporting obligations. The FCA also sets out what they will be doing to supervise Repositories in the portfolio.
The FCA sees the potential risks of harm specific to trade repositories as:
- The market is concentrated in a relatively small number of providers which has the potential to exacerbate operational resilience risk, limit the ability of market participants to switch provider and lead to lower incentives for trade repositories to provide high quality services and compete on prices offered to clients.
- Trade repositories having inadequate systems and controls to ensure that they do not introduce errors into data after market participants have submitted it to them.
The FCA sees the potential risks of harm specific to securitisation repositories as:
- The wider UK securitisation market and associated macro-economic conditions around securitisation repositories are still developing.
- Securitisation repositories may have inadequate systems and controls to ensure that they do not introduce errors into the data that they make available to regulatory authorities, investors, and potential investors.
- A securitisation repository may arrange for a third party, which is not registered with the FCA, to perform activities on its behalf.
Repositories should discuss and consider the key risk of harms presented in the letter with their board and senior management team and agree what further action should be taken to ensure that they meet regulatory requirements.