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More than a decade has now passed since the Pittsburgh Summit, at which Group of 20 leaders pledged to implement new derivatives trade reporting requirements to provide greater transparency and risk mitigation for the global derivatives markets following the global financial crisis that began in 2007–08. The derivatives industry is in a much better place now, with firms worldwide actively reporting the required transactions via authorized trade repositories, delivering new levels of transparency and risk mitigation. Now, with numerous global regulatory refits and rewrites under way to introduce more standardization in the derivatives transaction data collected in local jurisdictions, the industry is moving closer to the G20 vision of systemic risk management. DTCC has been a strong advocate for greater standardization of global trade reporting requirements from the outset.

In It from the Beginning

DTCC has been at the forefront of the evolution of the derivatives industry, providing comprehensive services to minimize the operational burden of global trade reporting mandates. Through its locally registered and authorized trade repositories, DTCC’s Global Trade Repository (GTR) service processes an estimated 80% of all derivatives transactions globally. The DTCC Report Hub service is a cloud-hosted technology platform, allowing clients to seamlessly complete pre- and post-reporting activities to ensure timely, accurate and complete reporting.

According to Tom Fitzgerald, Managing Director and Chief Technology Officer, Repository and Derivatives Services at DTCC, when derivatives reporting first came into effect, the GTR service used a “hub-and-spoke” model designed to facilitate the reporting of common data elements to various regulatory reporting bodies across the industry. “At the time, we selected best-of-breed, distributed technologies to support this model,” he explains. “However, as divergence in regulatory reporting requirements and standards across individual regimes emerged, coupled with stringent rules around the separation of trade repositories, we determined that further modernization was essential.”

As an industry-owned and industry-governed market infrastructure, DTCC continued to place the stability, security and resiliency of the GTR service at the center of the first phase of its modernization program, launched in 2017 and completed in 2021. “First and foremost, as an industry utility, providing a scalable and resilient solution is at the core of our service,” Fitzgerald says. “With the magnitude of data we process—about 400 million transactions per day with a historical footprint of 4 petabytes—moving to the cloud has enabled us to leverage computer capacity on-demand to provide even greater service capabilities. Additionally, the multi-location redundancy model offered in the cloud ecosystem has further strengthened our overall resiliency.”

Optimizing GTR

DTCC’s initial focus was to optimize its GTR application and data architecture—abstracting business logic from code and creating smaller service modules, while ensuring automation was at the core of driving delivery. “After focusing on the application and data, we pivoted to modernizing our underlying platform technology, extending to the cloud and then leveraging best-of-breed data platforms,” Fitzgerald continues.

The firm’s modernization effort has been underpinned by two key technology and data partnerships: Amazon Web Services and Snowflake. Fitzgerald explains that DTCC’s investment in automation and application re-architecture has increased its delivery agility, enabling better client service and enhanced product quality. Finally, he says, modernization has improved data access and insights for clients and regulators alike. “Historical data access is a key component of reporting assurance and market risk oversight, and the capabilities provided by our modernized platforms has improved the user experience, allowing faster access to broader datasets and better insights around the data that has been reported,” he says.

Keeping Pace with Change

As many technologists working across the capital markets would attest, regulations invariably change from statute book to feedback period and implementation, with post go-live rule revisions now par for the course. This means developing the underlying technologies to help firms comply with those regulations can present a challenge, given that revisions will almost certainly be required at some point down the road.

Chris Childs, Managing Director and Head of Repository and Derivatives Services at DTCC, and CEO and president of DTCC’s Deriv/Serv business, explains that leveraging cloud technology has also enabled the firm to provide improved tooling along with early availability of its GTR test environments for incoming rule refits and rewrites. “One benefit of being in the cloud is the ability to operate multiple environments in a cost-effective manner,” Childs adds. “More UAT [user acceptance testing] environments can be run simultaneously, which is crucial with the various regulatory reporting rules changes that are fast approaching or are already underway. Our clients need a UAT environment with the current production version as well as the new version. Now, we can have multiple environments, which can be easily implemented and then taken down after they have served their purpose”.

Childs’ comments also point to the challenge facing clients with respect to preparing for and complying with new reporting obligations, of which testing plays a crucial role. Essentially, market participant firms are having to contend with preparing for upcoming versions of reporting regulations while simultaneously complying with current trade policies.

Fitzgerald concurs with Childs’ assessment: “That’s going to be key to the [various upcoming regulatory] rewrites and helping clients navigate the evolving regulatory landscape and meet forthcoming obligations,” he says.

This article was originally published to Waters Technology on February 10, 2023.

Tom Fitzgerald, DTCC Managing Director and CTO, Repository and Derivatives Services
Tom Fitzgerald

DTCC Managing Director and CTO, Repository and Derivatives Services