The Depository Trust and Clearing Corporations (DTCC) Deriv/SERV, a provider of confirmation matching for the OTC credit derivatives market, this week gave Global Custodian an update on its global trade repository (GTR) for OTC derivatives. It also highlighted potential impediments to data sharing across different jurisdictions.
The Dodd Frank Act (DFA) requires all swaps – whether cleared or un-cleared to be reported to swap data repositories (SDRs) in order to enhance transparency, promote standardization and reduce systemic risk. In the US, the CFTC approved these rules for real time reporting and swap data reporting in December 2011. Credit interest rates reporting came into effect on Oct. 12 2012 for swap dealers and major swap participants (MSPs), who were not required to act until Dec. 31 2012. Reporting for FX, equities and commodities reporting became effective on Jan 10 2013, but no action is required from swaps dealers and MSPs until Feb. 28 2013. For all asset classes, non-swap dealer and MSPs reporting begins April 12 2013.
Similarly, in Europe, the European Market Infrastructure Regulation (EMIR) goal is to increase transparency by allowing for identification of systemic risk issues by regulators. Reporting in Europe starts earliest July 1 2013 for credit and rates and January 2014 for commodities, equity and FX.
Deriv/SERV GTRs main focus has been on U.S. delivery of the DTCCs trade repository, but the attention will shift rapidly to European and Asian implementations. In 2010/2011 the repository was selected as the preferred trade repository by ISDA and AFME for all five asset classes (credit, rates, equities, FX and commodities). In 2012, OTC Derivatives Regulators Forum (ODRF) reporting for interest rates began and, at the same time, Deriv/SERV GTR received CFTC registration to operate all five asset classes. At the same time DTCC was selected as a SPDR it received approval as an SDR for all asset classes and went live on Oct. 12 2012.
To meet regulatory reporting requirements under the DFA, the DTCC sends credit and interest rates data to the CFTC via FTP. From Feb. 28, when reporting for equity derivatives, FX and commodities becomes mandatory in the US, this additional data will become available to the CFTC.
In Europe, DTCC will look to register as a trade repository with ESMA. Currently, it is regulated by the UK Financial Services Authority and is recognized as operating as a trade repository, performing current ODRF reporting. Its data center in the Netherlands will provide data support in the region from July 1 2013.
The DTCC is also currently working on methods of direct information exchange through enhancements to its system based on the access the regulator requires, said Stewart Macbeth, president and CEO, DTCC Deriv/SERV.
Preparations for additional reporting in Europe are currently being finalized in line with ESMA technical standards, added Macbeth.
An update to information exchange agreements between certain regulators in the US and Europe is expected soon. “CPSS IOSCO is soon to publish guidelines on data access and sharing among international regulators,” said Macbeth.
Meanwhile, it is understood the US Congress is considering removing the indemnification provision from Dodd Frank through legislative action. The provision requires US-registered trade repositories to receive an indemnification agreement from foreign regulators before sharing market data with them – an attempt to shield US repositories and its regulators from any legal and financial liabilities stemming from a potential breach of confidentiality. Overseas regulators have indicated that they may be unable to sign such an agreement.
“This could create significant impediments to data sharing,” added Macbeth.
Hopefully an adaptation will be made so that regulators can have the necessary access to timely and relevant data sets.
(JDC)