by Roland Kielman
Amid ongoing congressional debate on the implementation of Dodd-Frank, DTCC hosted Representatives Jack Kingston (R-GA) and Michael Grimm (R-NY), on separate occasions, for briefings on its Trade Information Warehouse and the issue of indemnification.
“We were delighted to meet with Congressmen Kingston and Grimm at this important time in the financial regulatory reform process,” said Donald F. Donahue, DTCC president and CEO. “Although Congress passed Dodd-Frank nearly a year ago, its continued oversight of the rulemaking process makes cooperation with lawmakers essential. These visits give DTCC the opportunity to share its perspective on key issues such as indemnification, while at the same time building awareness of the role that DTCC plays in ensuring the safety and soundness of the global financial markets.”
Grimm and Kingston – members of the House Financial Services Committee and House Appropriations Committee respectively – are deeply involved in the oversight of the Dodd-Frank implementation process. Both had expressed interest in visiting DTCC to learn more about its role in mitigating systemic risk in the global financial markets.
Rep. Michael Grimm (R-NY)
Demo of the TIW and portal
The focal point of each congressman’s visit was a live demonstration of DTCC’s Trade Information Warehouse (TIW) and its new online regulatory portal. The briefings also addressed the indemnity provisions of Dodd-Frank – a relatively unknown element of the Act that could have a significant impact on the current relationship between regulators and swap data repositories like the TIW.
The TIW, the centralized repository for the global CDS market, facilitates the aggregation of data across the entire asset class and has played a critical role in enhancing transparency in these markets. Its online regulatory portal gives regulators direct and unfettered access to real-time data on virtually all credit default swap (CDS) transactions held in the repository within their jurisdiction.
“The comprehensive nature of the data stored in the TIW and the ease with which regulators can access this information make the online regulatory portal so effective,” said Larry Thompson, DTCC managing director and general counsel. “By demonstrating the TIW to our visitors, it becomes clear that in order to ensure regulators have access to aggregate market data when they need it most, new regulations must encourage the appropriate sharing of information and global regulatory cooperation.”
Potential unintended consequences
The briefings also covered the issue of indemnification and its potential to create unintended, negative consequences for regulators to access critical market data.
Currently, the extraterritorial provisions of Dodd-Frank require swap data repositories (SDRs) to sign indemnification agreements with foreign regulators before sharing information with them – a requirement that is likely to reduce global regulatory cooperation and overall data consumption. Without an indemnity agreement, SDRs may be legally precluded from providing critical market data to regulators overseas. A similar provision recently passed the European Parliament and could be included in the final draft of the European Market Infrastructure Regulation (EMIR), which is still under debate in Europe. If the provision becomes law overseas, it is likely that U.S. regulators would face similar obstacles when accessing market data stored in European repositories.
Rep. Jack Kingston (R-GA) with Donald F. Donahue, DTCC president and CEO (left), and Robert Druskin, DTCC executive chairman of the Board (right).
Taking the lead
Kingston publicly raised concern over the indemnification requirements during a special order he delivered on the topic earlier this year. Later, he and Congressman Sam Farr (D-CA) sent a letter to prominent members of the European Parliament, urging them to exclude similar provisions from EMIR and pledging their support for working together to find a resolution.
“Congressman Kingston and his colleagues in the House and Senate have played a critical role in raising awareness of this issue on both sides of the Atlantic,” said Dan Cohen, DTCC managing director, Government Relations. “This issue appears to be gaining traction as lawmakers and regulators begin to focus on the indemnity provisions and their potential impact on market transparency.” @