SMART Regulation: A Primer By: OMG Finance task Force, DTC Members

Makers & Enforcers of Regulation The Challenge The Answer: Smart Regulation Consumers of Regulation (regulated entities, software vendors, NGOs, standards bodies, academics…) Congress White House European Union Office of Financial Research SEC CFTC Treasury FDIC FINRAEBA FSB Regulatory language is complex, ambiguous, rules subject to interpretation, nuanced Business/economic value and risks for regulated entities is not clearly defined Cost of implementation is prohibitive; internal benefits are not clear Jurisdictional boundaries are not always clear Impact on internal business, IT policies is prohibitive leading to economic disadvantage Regulatory rules and data is not easily exchangeable Rules often overlap, conflict across regulatory agencies Etc. Regulatory language is complex, ambiguous, rules subject to interpretation, nuanced Business/economic value and risks for regulated entities is not clearly defined Cost of implementation is prohibitive; internal benefits are not clear Jurisdictional boundaries are not always clear Impact on internal business, IT policies is prohibitive leading to economic disadvantage Regulatory rules and data is not easily exchangeable Rules often overlap, conflict across regulatory agencies Etc. Key Features Regulatory Rules and disclosures requirements are precisely defined and documented (see link for an illustrative example) Regulation efficiency metrics (Cost, benefits and risk) metrics are available for the regulation Overlaps, conflicts of Rules, time-lines, jurisdictional application is precisely defined and documented Rules, disclosures are defined using industry data standards where possible Regulatory and disclosure data is exchanged using industry standard formats Reported using standard reporting language Key Features Regulatory Rules and disclosures requirements are precisely defined and documented (see link for an illustrative example) Regulation efficiency metrics (Cost, benefits and risk) metrics are available for the regulation Overlaps, conflicts of Rules, time-lines, jurisdictional application is precisely defined and documented Rules, disclosures are defined using industry data standards where possible Regulatory and disclosure data is exchanged using industry standard formats Reported using standard reporting language Engines of automation go here How IT systems will consume data standards Engines of automation go here How IT systems will consume data standards Categories of Data Standards Identifiers Regulation life-cycle, economic value metrics Rules and disclosure Vocabularies (business natural language) Information Models (data models, Taxonomies, Ontologies) Exchange, Reporting and publication formats Categories of Data Standards Identifiers Regulation life-cycle, economic value metrics Rules and disclosure Vocabularies (business natural language) Information Models (data models, Taxonomies, Ontologies) Exchange, Reporting and publication formats Sample Case Studies RegW, Front Running Secondary Mortgage Market Counterparty exposure reporting and analysis LEI implementation support Dutch Immigration innovation Sample Case Studies RegW, Front Running Secondary Mortgage Market Counterparty exposure reporting and analysis LEI implementation support Dutch Immigration innovation Regulators consuming standardized reports, analytics data Regulators defining, managing regulations, disclosures using SMART Regulation Principles and data Standards StandardizedMeasurableAgileReliableTransparent Regulation Ecosystem Advocacy: Training, innovative tools, Consulting

SMART Regulation

Complex Natural Language Complex IT Infrastructure

SMART Regulation Complex Natural Language Complex IT Infrastructure Determine Fines Determine Costs

SMART Regulation Complex Natural Language Complex IT Infrastructure Determine Fines Determine Costs Political Intent Business Objectives

SMART Regulation Complex Natural Language Complex IT Infrastructure Determine Fines Determine Costs Political Intent Business Objectives ?

SMART Regulation Complex Natural Language Complex IT Infrastructure Determine Fines Determine Costs Political Intent Business Objectives

Regulators defining, managing regulations disclosures using SMART Regulation Principles & Data Standards Regulators consuming standardized reports, analytics data SMART Regulation Complex Natural Language Complex IT Infrastructure Determine Fines Determine Costs Political Intent Business Objectives