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by Judy Inosanto

Related Information

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  • DTCC launched its global, overthe- counter (OTC) interest rates derivatives trade repository in early December.

    DTCC’s Global Trade Repository for Interest Rates for this US$553.8 trillion market (approximately €414 trillion or £356 trillion) will be based in London. Data from 15 of the largest global dealers is now being submitted to the repository. This launch represents the latest development in DTCC’s drive to bring greater transparency across different OTC derivative asset classes, helping to reduce operational and systemic risk. DTCC already operates global trade repositories for OTC credit derivatives (principally credit default swaps) and for OTC equity derivatives. The company is also planning initiatives in the foreign exchange (FX) and commodities OTC derivatives markets.

    ‘Global solutions’

    Commenting on the announcement, Stewart Macbeth, president and CEO of DTCC Deriv/SERV LLC, the DTCC subsidiary responsible for the company’s OTC derivatives activities, said, “The launch of this new interest rates trade repository is a significant step forward in ensuring that key information about the OTC derivatives market is transparently available to regulators globally as they work to ensure that systemic risk is quickly identified and minimized. DTCC is committed to partnering with the OTC derivatives community and supervisory authorities to establish effective global solutions that strengthen the infrastructure for trading OTC derivatives instruments and help protect the safety and stability of the global OTC derivatives market.”

    DTCC was selected to build the global interest rates trade repository in May 2011, following a competitive Request for Proposal process managed by the International Swaps and Derivatives Association’s Rates Steering Committee. Launching such a repository is a central part of the industry’s efforts to fulfill its obligations under the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act, the proposed European Market Infrastructure Regulation legislation in Europe and other financial oversight mandates worldwide.

    How the service will work

    Initially, all trades by global dealers can be submitted to the Global Trade Repository for Interest Rates directly from the members. Additionally, rates trades of those firms matched and confirmed in the MarkitSERV MarkitWire service will be submitted on behalf of the firms.

    Since the vast majority of OTC interest rate derivatives trades are electronically confirmed through MarkitSERV, these trades will flow into the trade repository automatically in near real time. Trade positions not confirmed in MarkitSERV will be submitted directly by firms on a daily basis.

    The service currently supports trade submissions for OTC interest rate swaps (basis, fixed-float, cross-currency, etc.), forward rate agreements (FRAs), overnight indexed swaps (OISs), debt options, swaptions, inflation swaps and other complex interest rate contract types. The initial product release focuses primarily on meeting voluntary regulatory reporting commitments of the largest OTC interest rate dealers. In 2012 DTCC’s systems will be expanded to support Dodd-Frank trade reporting requirements, as well as to support additional trade reporting by buyside and other market participants and to support reporting requirements as additional global regulations emerge.

    Well-established infrastructure

    DTCC already operates a global trade repository for OTC credit derivatives, principally involving credit default swaps, which holds trade data on about US$28 trillion (€20.8 trillion or £17.7 trillion) of credit derivatives trades. It also operates an OTC equity derivatives repository.

    In addition, DTCC provides a global web portal that allows regulators worldwide to obtain confidential information on the CDS and equity derivatives trades registered in these repositories. The portal was created in collaboration with, and based on the information guidelines of, the OTC Derivatives Regulators Forum, which represents more than 50 regulators from 20 countries around the world. That same portal is expected to be used to ultimately provide interest rates trade data to regulators globally. Regulators are not charged any fees for this online service.

    An at-cost cooperative owned and governed by the financial industry, DTCC also publishes, free of charge, comprehensive aggregate data for the top 1,000 corporate and sovereign credit derivatives and credit derivatives indices on every Tuesday. (See article, page 11.)

    Ultimately, DTCC will also publish public data on other OTC derivatives on the site.

    Next up: FX and commodities

    DTCC, in collaboration with SWIFT, an international financial messaging provider for more than 9,700 financial institutions, was selected following a competitive Request for Proposal process managed by the Global FX Division of the Global Financial Markets Association (GFMA), to build and operate a global FX OTC derivatives repository. The GFMA comprises the Securities Industry and Financial Markets Association (SIFMA), the Association for Financial Markets in Europe (AFME) and the Asia Securities Industry & Financial Markets Association (ASIFMA).

    DTCC is also collaborating with EFETnet, the European energy trading industry cooperative, to build a global commodity derivatives trade repository. DTCC and EFETnet are working with the industry to finalize the timeline for the rollout of the service. @