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This Monday, Goldman Sachs Group Inc. (NYSE:), HSBC Holdings Plc (LSE:LON:), Barclays Plc (LSE:BARC), BNP Paribas (OTC:) SA (EPA:BNP) and another unnamed bank announced their collaboration to adopt a unified global approach to disclosing clients’ stock positions. The new initiative is expected to enhance transparency and reduce costs, according to the parties involved.
The consortium, dubbed ‘Endoxa’, has enlisted the services of financial technology firm Droit to develop a Position Reporting Utility. This tool aims to improve the quality of disclosures regarding clients’ long and short bets across different markets. “They are getting our help to facilitate the correct and timely reporting of those positions,” Brock Arnason, CEO of Droit, said in an interview.
The banks’ collaborative move comes as regulators worldwide are pushing for increased disclosures from hedge funds and other asset managers about their investments. The Securities and Exchange Commission (SEC) has been drafting new rules requiring more transparency on certain types of derivatives. This regulatory push was motivated by trader Bill Hwang’s massive derivative positions that led to the collapse of his family office Archegos Capital Management, exposing a regulatory blind spot.
The Position Reporting Utility will function by reviewing disclosure rules across key jurisdictions with the help of the law firm Allen & Overy. The consortium will then develop a consensus view on meeting these obligations. Droit will translate this consensus into a model that banks can use to better understand their reporting obligations for each trade.
“Creating this consortium will enable us as financial institutions to more effectively and efficiently navigate the regulatory complexity of the global position reporting rules while retaining each firm’s ownership of the underlying risks,” Richard Hempsell, Global Head of Core Operations at Goldman Sachs, said in a statement. He further added that the platform would promote unified standards and support transparent, consistent compliance across the industry.
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