ICE to Launch SDR

Terry Flanagan

The IntercontinentalExchange will introduce its swap data repository service next year, as Dodd-Frank regulation looms on the horizon.

ICE has formally applied to the Commodity Futures Trading Commission to register its ICE Trade Vault service as a swap data repository, or SDR. ICE, along with the Depository Trust & Clearing Corp., will be among those providing reporting services for over-the-counter swaps.

“We’re in the midst of a number of regulations coming out, the market is adjusting, as well as market participants, customers and entities like ICE,” Christopher McEntee, director of corporate development at ICE, told Markets Media.

One of the key objectives of the Dodd-Frank Wall Street Reform and Consumer Protection Act is increasing the transparency of the markets, especially in the over-the-counter derivatives market, one of the primary culprits of what set off the financial crisis.

When ICE Trade Vault goes live next year as an SDR, it will be one of the venues where traders can report their transactions.

“Market participants will be required to report swaps to these entities as quickly as technologically possible,” said McEntee.

The idea behind SDRs is for regulators to have a quick and simple way to access aggregated data pertaining to OTC swaps. It will give policy makers key information, allowing them to better understand the markets and to create more targeted regulatory reforms.

While ICE awaits regulatory approval of its application and for the rules of Dodd-Frank to be finalized and implemented, it will look to build a preliminary beta so that all the necessary testing and tweaking can be conducted, according to McEntee. It plans to have a working beta for customers to test during the first quarter of 2012. The idea is to have all the bugs worked out and for customers to have their compliance requirements in place so that the rollout of the service can be accelerated by the time the final rules are established.

ICE eConfirm, which has been providing electronic trade communication services for nearly a decade, will be underpinning the Trade Vault SDR service. Because of regulatory requirements, Trade Vault will be operated independently, apart from the main ICE operations. The point was to avoid and potential conflicts of interests and to ensure neutrality, according to McEntee.

Related articles