Excellence in Regtech, Product Solution: FRTB Service, DTCC

Excellence in Regtech, Product Solution: FRTB Service, DTCC

FRTB Service, DTCC won Best in Regtech, Product Solution at the 2020 Markets Choice Awards. Markets Media caught up with Tim Lind, Managing Director of DTCC Data Services, to learn more.

Tim Lind, DTCC

What is your reaction to FRTB Service winning Excellence in Regtech, Product Solution in the 2020 Markets Choice Awards?

We want to thank Markets Media for presenting us with this award. The FRTB Service was truly a collaborative effort supported by our pilot member banks to understand and tackle the complex requirements of the Fundamental Review of the Trading Book – or FRTB.

Please describe what the product is all about — what are the primary capabilities and how does it differentiate?

DTCC’s FRTB Service is a comprehensive “real” price observation data solution. Including over 100 million transactions in its data pool, the FRTB Service leverages DTCC’s unsurpassed data collection capabilities as the premier post-trade market infrastructure for the global financial services industry. The service puts the users in the driver’s seat, allowing them to customize their own portfolio of risk factor characteristics to mirror the risk profile, which streamlines the operational processes to support their non-modellable risk factor (NMRF) analysis under the regulation.

How did the FRTB Service come into existence – what market need was it meant to fill?

Since the financial crisis over a decade ago, ensuring a more resilient banking sector continues to be a principal goal of the Basel Committee on Banking Supervision (BCBS). For the BCBS, the introduction, refinement and final implementation of FRTB is a critical means to this end. DTCC was invited by the banking sector to help ensure compliance. We built a global community where the banks entrust DTCC to service them with reliable and high-quality data to meet the needs for NMRF assessment.

How is the FRTB Service a collaborative solution with the financial industry and how does it help with resilience and liquidity?

With FRTB’s overhaul of the minimum capital requirements for market risk, banks are now required to demonstrate sufficient market liquidity for the positions in their trading book that are capitalized using approved internal models. With this in mind, DTCC partnered with dozens of the leading banks globally that trade over-the-counter derivatives. Banks shared their insights and intelligence with us to help us build the FRTB Service that is currently in beta.

What have been recent accomplishments / current initiatives with regard to FRTB Service?

Implementation of FRTB was delayed until 2023, but we are encouraging banks to continue to get ready for the rules.We have recently sourced the OTC derivatives data from the APAC region, including Singapore, Australia, Hong Kong, and Japan. In addition, our service now has US cash transaction data available. We remain fully committed to working with the banks participating in our pilot to prepare for the new deadline.

What does the future hold for DTCC’s FRTB Service?

Data is at the center of the Fundamental Review of the Trading Book framework and its full application. We believe DTCC’s FRTB Service serves as an anchor data source upon which banks can build a comprehensive data sourcing strategy.

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