DTCC Readies European Repository
The Depository Trust & Clearing Corporation, the US clearer, is testing its European trade repository with 1,000 clients as it received regulatory approval last week ahead of going live in February.
“We are testing with more than 1,000 clients and expect that to grow. We are seeing a lot of interest from pension fund managers, large asset managers and corporates,” said Stewart Macbeth, chief executive of DTCC Derivatives Repository Limited (DDRL) and chief product development officer, DTCC Deriv/SERV.
DDRL was one of the first four trade repositories approved by The European Securities and Markets Authority last week. The registration take effect on November 14, 2013 with trade reporting due to start on February 12, 2014.
Counterparties using an approved trade repository will meet their derivatives reporting obligations under the European Market Infrastructure Regulation.
The DTCC’s European derivatives repository is based in London with a data centre in the Netherlands. The ESMA registration adds to the US clearer’s licences in Japan and Singapore, which were both approved this year.
“Our code has been seen and used elsewhere in the US, Japan, and Singapore. We tuned the interest rate code to make the volume and size of messages more efficient,” Macbeth told Markets Media.
Macbeth said customers with an existing connection to DTCC can use the trade repository be ensuring their messages have the right DTCC legal entity, they explicitly input “ESMA” in the message formats and add some EU specific fields
To allow clients to connect quickly the DTCC has launched a self-registration portal which it said can be completed in minutes with activation within 24 hours. Derivatives dealers and end users can also report through a intermediaries or middleware providers that are connected to DTCC’s trade repository.
“As a multi-jurisdictional trade repository, we are able to offer economies of scale. We are in favour of competition and expect innovation to continue,” Macbeth added.
The repositories cover all five derivative asset classes – credit, interest rate, equity, foreign exchange and commodities – and foreign exchange isa expected be the most difficult to adapt to the new regulations.
“In foreign exchange the market needs to agree on unique trade identifiers and the confirmation process. Unlike the credit markets, there are no large middle-ware providers hosting this infrastructure. However I do not think either of these issues are insurmountable,” said Macbeth.
EMIR requires both counterparties to a derivatives trade to report over-the-counter and exchange-traded deals. However it may be possible for buy side firms to rely on a third party to report their trades to an authorised repository.
“We have been talking to the buy side about them delegating trade reporting to dealers but other third parties and vendors could also potentially help,” said Mackenzie.
Even though there are just 90 days between the effective registration of repositories and the start of reporting, Macbeth believes that the most active market participants will meet the deadline.
“Many of the large institutions will be ready by the February deadline. Corporate customers and smaller buyside firms are getting ready but have less to do as they trade less,” said Macbeth.