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by Roland Kielman

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Government Relations

With regulators rapidly approaching the deadline for finalization of Dodd-Frank-related rules, DTCC hosted Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), for a briefing on DTCC’s Trade Information Warehouse (TIW) and online regulatory portal.

“We were delighted to meet with Chairman Gensler during this critical phase of financial regulatory reform,” said Donald F. Donahue, DTCC president and CEO. “It is essential that regulators and market participants share their insights and perspectives on the rulemaking process, and briefings like this allow us to explain our viewpoint on key issues and also demonstrate DTCC’s unique capabilities that can help regulatory agencies achieve their goals of transparency and risk mitigation.”

Demonstration of TIW and portal

The focal point of Chairman Gensler’s visit to DTCC was a live demonstration of the Trade Information Warehouse (TIW) and its new online regulatory portal, which gives regulators direct and unfettered access to real-time data on virtually all credit default swap (CDS) transactions held in the repository.

“The demonstration highlighted the type of granular data that we provide to regulators through the portal and the critical role it plays in mitigating risk by enhancing transparency in the global CDS market,” said Marisol Collazo, DTCC vice president of the Trade Information Warehouse. “Chairman Gensler requested that additional meetings be arranged to determine how CFTC technology staff can effectively leverage the capabilities of the TIW to meet their respective needs.”

Gary Gensler, chairman of the Commodity Futures Trading Commission

Phased implementation

The TIW, which is the only centralized repository for the global CDS market, facilitates the aggregation of data across the entire asset class. Dodd- Frank requires that all OTC derivatives trades, whether cleared or uncleared, be reported to a swap data repository (SDR). Although the legislation does not call for the designation of centralized SDRs, during the briefing, DTCC expressed its concern that failure to centralize data could inhibit the ability of regulators to obtain a comprehensive view of the exposures within any given asset class, particularly during times of market stress.

Chairman Gensler also asked for DTCC’s perspective with regards to manageable timeframes for the phased implementation of the reporting of swaps transactions. To ensure that market participants can effectively comply with new regulations, the CFTC currently envisions the first phase of implementation, including the finalization of policies, procedures and rules governing swaps transactions, with subsequent phases designed to implement the actual clearing and reporting of these financial instruments. DTCC said that it could be fully compliant and able to receive data very quickly after final rules are announced and that market participants would be able to send complete data within six to nine months of regulatory approval process finishing.

At the conclusion of the briefing, the CFTC Chairman encouraged DTCC to continue participating in public meetings and roundtable discussions that the Securities and Exchange Commission and CFTC are hosting to address the schedule for implementing final rules for swaps and security-based-swaps.

More on Gensler and the CFTC

Gensler has served as chairman of the CFTC since 2009. Selected by President Obama for this position, he is one of the most prominent figures in American financial regulatory reform. Gensler previously served at the U.S. Department of the Treasury as Undersecretary of Domestic Finance and Assistant Secretary of Financial Markets.

Scott Schneider, the CFTC director of Public Affairs, and Stephen Obie, director of the CFTC’s New York Regional Office, accompanied Chairman Gensler during his visit.

With more than 240 Dodd-Frank rules and regulations by statute requiring finalization by July 16, 2011 (even though both the CFTC and the SEC acknowledge that this deadline will be missed), the U.S. regulatory agencies face a challenging task in the coming months.

Having seen its jurisdiction and regulatory responsibilities expand greatly under the Dodd-Frank Act, the CFTC is now responsible for the regulation of the vast OTC derivatives market. The CFTC and the SEC are currently working to develop the relevant definitions and rules to govern these complex financial products. @