Beyond January’s “Success”
When January 2024 approached and the CFTC Phase 2 went live, the industry successfully implemented UPI reporting on schedule. Success stories dominated the headlines, compliance teams celebrated their green dashboards and executives moved on to the next priority. But ask anyone actually running operations and you’ll hear a different story. For them, go-live was just the beginning. The real race began when they had to keep everything running smoothly day after day and dealing with the messy realities that compliance metrics conveniently overlook.
While ACK/NACK messaging functions through services like SWIFT grab attention for their immediate operational impact, the CFTC rewrites represent something far more comprehensive – a fundamental transformation of how derivatives data must be captured, validated, reconciled and reported across every system in the trade lifecycle.
Where Firms Are Actually Struggling
The challenges extend well beyond simple message acknowledgments. Based on industry observations, firms are grappling with:
The 7-Day Problem: CFTC requires firms to notify DTCC of errors within 7 days but identifying and fixing NACK reasons takes much longer with manual processes. This isn’t just about message acknowledgments – it’s about comprehensive data validation across all required fields.
NACK Message Complexity: Settlement failures, data mismatches and post-trade breaks require immediate attention.
Post-Settlement Reconciliation: Moving from “trade submitted” to “trade properly reconciled and reported” requires seamless data flow between systems.
Cross-System Challenges: Reconciling specific trade data from internal sources against disparate counterparty sources presents ongoing difficulties.
What Operations Leaders Are Saying
The disconnect is clear that post-trade aspects of the trade lifecycle are becoming the critical challenge for operations teams. NACK messages represent settlement failures and post-settlement data breaks that need immediate resolution but the real challenge goes deeper – reconciling specific trade data from internal sources against disparate counterparty sources while meeting all CFTC field requirements has become increasingly complex with existing tools and processes.
Phase 3 Will Be Much Harder
What’s coming:
- UPI for commodities and ISO 20022 XML messaging standards likely in 2025
- Broader range of instruments means more complex reconciliation requirements
- Regulator high expectations: Unresolved breaks needing automatic regulatory reports on 7-day aged items
Industry view: Some argue postponements will only be postponing the pain.
Operations Are Not Ready
The current state of operations reveals a patchwork of systems handling different pieces of the CFTC requirements. This creates a nightmare scenario where firms face volume overwhelm due to manual processes, classification chaos across different data taxonomies and escalation bottlenecks when issues arise.
Organizations struggle with lost visibility into their audit trails, inadequate data validation capabilities and fragmented resolution workflows that can’t scale to meet regulatory demands. Most concerning is the domino effect which is when one element fails in this fragile ecosystem, it cascades and triggers failures across the entire post-trade chain. This potentially impacts reconciliation, reporting and compliance simultaneously.
How AutoRek Addresses the Full Scope of CFTC Challenges
Unlike point solutions that address only messaging or single-system reconciliation, AutoRek provides comprehensive data management across the entire CFTC requirement spectrum:
Where AutoRek fits:
- Handles any data format without prep work
- Processes high-precision calculations (up to 18 decimal places for crypto assets)
- Automates the full reconciliation cycle
- Maintains complete audit trails
These capabilities directly address the burdens and challenges around data fields and data quality, record keeping, compliance, reconciliation and reporting imposed by the CFTC rewrites – and work across systems not just for individual message types.
Practical Next Steps
- Map your post-trade workflows – understand where manual processes create bottlenecks
- Test your exception handling – can you identify and fix errors within regulatory timeframes?
- Review your data quality controls – UPI introduces new validation requirements
Plan for Phase 3 – don’t get caught unprepared again