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Understanding What Trade Repositories Are

Traders will have to share transaction information over repositories.

Two of the major regulatory bodies - the International Organisation of Securities Commissions and the Bank for International Settlements - recently issued a joint report mandating the use of central information warehouses for derivatives trades.

Dow Jones reports that regulators aim to gain greater visibility into the process of trading derivatives, with the overarching goal of preventing another global financial crisis such as that seen in 2008.

With banks and other traders required to submit their trade information to these databases, it's important to first know what they are. The warehouses, known as trade repositories, are a system established by regulators, and serve as a centralized location for data on outstanding over-the-counter (OTC) derivatives.

According to the Bank for International Settlements, "well-designed" repositories that have strong risk controls can be a useful tool for helping authorities gather and distribute reliable data and may provide greater insight into the OTC derivatives market.

"As a universally available system for uniquely identifying legal entities in multiple financial data applications, LEIs would constitute a global public good," the report said, as quoted by Dow Jones.