DTCC Moves Ahead With U.S.-Based Swap Data Repository

Terry Flanagan

The Depository Trust & Clearing Corporation (DTCC), the post-trade group, has received approval from the Commodity Futures Trading Commission (CFTC), the top U.S. derivatives regulator, to create and operate a multi-asset class swap data repository (SDR) in the U.S..

The SDR, which will be operated by DTCC Data Repository (U.S.), or DDR, will be fully operational on October 12, the first day of required swap data reporting.

By allowing the financial service industry to partner with regulators to more effectively monitor and mitigate potential systemic risk, the U.S.-based SDR is an important step in implementing the Dodd-Frank Act by achieving these goals and helping to bring greater transparency to the OTC derivatives market, according to the DTCC.

“The reporting requirements call for extensive detail and timely reporting,” said Stewart Macbeth, president and chief executive of DTCC Deriv/SERV, a post-trade processing subsidiary of the DTCC. “The rules are relatively complex.”

Swaps transactions need to be reported in near real-time, creating technical challenges for the reporting firms and for DDR.

“They do need to be in real time as much as technically feasible for public price dissemination,” said Macbeth. “Firms have the timeliness challenge and we had to ensure the system operated with low latency.”

The process of reporting trades in credit and interest rate derivatives to an SDR is scheduled to begin on October 12 for registered entities, however there remains some time for registration for dealers and MSPs [major swap participants].

“Firms are working diligently to meet reporting requirements in the specified time frame,” said Macbeth.

Central reporting of OTC transactions is one of the three pillars of derivatives reforms, along with execution and central clearing. The CFTC is one of the first regulatory bodies globally to require mandatory reporting of OTC derivatives trading.

The DTCC created the first global trade repository, for credit derivatives, in 2006, primarily to provide processing efficiencies for the burgeoning OTC market segment. Since 2008, the DTCC has built global trade repository services for OTC derivatives in multiple asset classes.

“The DDR’s mission is to create resilient and robust reporting infrastructure to enable the industry to meet its global OTC derivative trade reporting requirements,” said Oliver Stuart, global head of derivatives operations at bulge bracket bank Morgan Stanley, in a statement.

“The industry has invested significant resources in partnership with DDR to ensure compliance with the reporting requirements of the Dodd Frank Act and the broader G20 mandate, and so this provisional approval from the CFTC is an important milestone both for the DDR and the industry.”

Four of those asset classes—credit derivatives, equity derivatives, interest rate derivatives and commodity derivatives—are already fully or partially operational, and the repository for foreign exchange is expected to be operational from January next year.

The DTCC’s Trade Information Warehouse (TIW), which holds 98% of all credit derivative transactions, is operated through its U.S.-based Warehouse Trust and its European-based DTCC Derivatives Repository.

The DTCC Derivatives Repository operates the trade reporting repository for OTC equity derivatives transactions, and also houses credit default swap data identical to that registered in the U.S.-regulated Warehouse Trust to help ensure that regulators globally have secure and unfettered access to CDS information on two different continents. The company also has plans to build trade repositories in Asia.

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