DTCC and SWIFT teamed up to win industry recommendations on two separate competitions to develop transparent data flows for monitoring systemic risk. Global foreign exchange (FX) organizations selected DTCC and SWIFT to develop a global, electronic repository for FX derivatives trades, where information can be stored electronically to provide transparency for regulators worldwide. And a coalition of financial services firms and trade associations recommended that DTCC, SWIFT and the International Organisation for Standardisation (ISO) build and operate a global legal entity identifier (LEI) system. The two organizations were recommended to operate the core LEI utility as the central point for data collection, data maintenance, LEI assignment and quality assurance.
"These mandates are exciting examples of DTCC collaborating with SWIFT and other industry counterparts to leverage capabilities and expertise to build new and more effective ways to manage and oversee risks in the financial system," said Donald F. Donahue, DTCC CEO and president. "They also signal DTCC’s growing role in global risk management."
"It is great to see DTCC and SWIFT partnering again to solve industry challenges," said Chris Church, chief executive, SWIFT Americas & Global Head of Securities. "The combined strengths of these two industry-owned and -governed utilities create unique solutions that will reduce risk in a cost-efficient way for the global financial community."
Church added, "We look forward to working with DTCC on these initiatives and future initiatives to help solve common challenges facing the global financial industry."
The recommendations were the culmination of extended competitive evaluation processes. DTCC and SWIFT are both industry-governed, at-cost cooperatives.
DTCC currently operates global credit derivatives and equity derivatives repositories and has also been selected to develop new interest rate and commodities derivatives repositories.
The selection process for the FX repository was led by the Global FX Division of SIFMA, the Association for Financial Markets in Europe (AFME) and the Asia Securities Industry & Financial Markets Association (ASIFMA), comprising 22 market participants representing over 90% of the global foreign exchange market. The process was in response to regulatory requirements that call for certain FX derivatives trades to be reported to a trade repository.
DTCC and SWIFT will now begin working with the Global FX Division to develop the core functionality and technology requirements, which, the division noted, were "particularly challenging for FX due to the number of participants, the volume of trades and the fact that participants in the FX markets are truly global, as well as understanding how the needs of multiple regulators can be met."
"To ensure that regulators have access to the maximum amount of data and that market participants of all sizes are not overburdened with multiple reporting formats, our aim as far as possible is to standardize industry reporting in all regions," said James Kemp, managing director of the Global FX Division. "We are actively discussing this with regulators in multiple countries, to understand their requirements and how we can help meet them."
The LEI initiative was led by a group of over a dozen trade associations from around the world, in coordination with the Global Financial Markets Association (GFMA) composed of SIFMA, AFME and ASIFMA. This coalition’s recommendation is a first step in developing a global industry consensus on the requirements and standards for a viable, uniform and global LEI solution.
SWIFT and DTCC, along with DTCC’s Avox subsidiary in Wrexham, U.K., partnered on a joint proposal with ISO, which was recommended as the LEI standards body. As indicated in the trade associations’ recommendation, the organizations are looking to extend the collaboration to additional partners such as the national numbering agencies, which can provide local expertise to the LEI solution in their home markets for the registration of issuers and obligors. The trade associations also indicated that they expect several of the other organizations that responded to the proposal to participate in complementary roles.
"These groups together possess the strong scope, scale and experience necessary to meet the global financial services industry’s requirements and make a global LEI solution successful," said Tim Ryan, CEO of GFMA. "An international standard for an LEI solution would enable regulators and individual firms to better monitor systemic risk. GFMA, through its work with global market participants, has developed a framework for a globally viable solution that will be available to regulators around the world."@
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