DTCC Connection

Jun 01, 2012 • DTCC Connection

DTCC Launches Repositories For Two OTC Derivatives Classes

by Steve Letzler



DTCC has begun testing and initial production on global trade repositories for commodities and for foreign exchange. These two asset classes are the last of five over-the-counter (OTC) derivatives for which DTCC will capture trades and provide reporting to regulators, the industry and the public.


The repositories are expected to be fully operational and in production by October 2012.


Five asset classes

The repository for commodities derivatives, built by DTCC in partnership with EFETnet B. V. of The Netherlands, started accepting trade submissions in March, following a successful pilot program that began in January.


The repository for OTC foreign exchange derivatives, developed by DTCC in partnership with SWIFT, began user acceptance testing in early May.


DTCC developed the world’s first trade repository for OTC credit derivatives in 2006, initially called the Trade Information Warehouse. The company subsequently received industry approval, following competitive bidding processes, to develop global trade repository services for equity, interest rate, commodity and foreign exchange OTC derivatives.


Leveraging the portal

DTCC’s at-cost model for repositories allows users to submit trades to a single repository in order to fulfill reporting obligations to regulators globally. Trade reporting for the repositories for both commodities and foreign exchange derivatives will be provided to regulators through DTCC’s web-based regulatory portal, beginning in the fourth quarter.


DTCC initially developed this portal to give regulatory agencies from around the world the ability to obtain near-real-time information on credit derivatives trading, based on voluntary reporting agreements and supervisory authority entitlements. The portal was later expanded to include OTC equity derivatives and interest rate derivatives.


Some 40 regulatory agencies globally currently use the portal for OTC derivatives monitoring.


Commodities repository

The operation of the commodities derivatives repository is being phased in.


According to John Straley, DTCC Vice President of Product Management for DTCC Deriv/SERV LLC, the first phase allowed participants to create positions in the repository with reports of snapshot, primary economic terms or confirmation data.


Companies can maintain positions in the repository either by reporting a daily snapshot of all their OTC commodity positions or by reporting changes to their OTC commodity positions. Initial coverage consists of contracts for natural gas, power, oil, agriculture, emissions, financial freight and the weather.


The second phase began on May 14 and included real-time messages, primary economic terms, confirm data and valuation messages. The repository can now accommodate single or dual-sided trade submissions, as well as support for fields specific to the Dodd-Frank Act.


The repository will offer a full range of commodities swaps, both physical and financial. In addition, DTCC is working with market participants and regulators from around the globe to promote a single, central location to which commodities swaps and other trade types can be reported. This will include a single, central location from which regulators can view information on swaps positions that fall into their individual jurisdictions, thereby easing the reporting burden for all market participants. Reporting through DTCC’s regulatory portal will begin once the repository becomes fully operational in October, and the publication of public data is expected to follow.


“DTCC is delighted to be working with EFETnet to provide a repository for commodities that will support regulatory reporting requirements for this sector,” said Stewart Macbeth, DTCC President and CEO, Deriv/SERV LLC. “We have been working for some time with the commodities industry on an implementation plan that both provides improved trade reporting timelines and quality standards and is compliant with existing and upcoming global legislation. This repository is the result.”


“The launch of the Global Trade Repository for Commodities by DTCC and EFETnet is another important step forward in improving regulatory transparency in the OTC derivatives markets,” said Julian Day, Head of Market Infrastructure for the International Swaps and Derivatives Association (ISDA). “Policymakers around the world will have greater insight and access to OTC derivatives trades across the range of interest rate, credit, equity and commodities asset classes.”


EFETnet was established by the European Federation of Energy Traders (EFET), an organization founded in 1999 by Europe’s leading energy companies, and is used for EFET and non-EFET energy trading contracts. EFETnet B.V., an independent company, is 100% owned by the EFET. It was set up in 2004 by EFET to serve those actively involved in energy trading and is intended to deliver the benefits of electronic data exchange standardization.


FX repository

The OTC foreign exchange (FX) derivatives trade repository will also be delivered in two phases to facilitate testing and provide greater flexibility for firms that plan to use it to meet regulatory reporting requirements.


The first phase, which began May 1, covers testing of data submission of primary economic terms, confirmation data and snapshot reporting by firms for foreign exchange forwards, swaps and derivatives. These capabilities will bring FX to a level consistent with that of other asset classes supported by DTCC.


The second phase, expected to start around July 1, will add further testing of message types and extend reporting. Full production is expected to be available in October. For foreign exchange products, DTCC is working on establishing aggregate public data reporting capabilities with the OTC Derivatives Regulators’ Forum (ODRF), central bank-sponsored Foreign Exchange Committees and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association (GFMA).


DTCC plans on publishing aggregated data on OTC foreign exchange trades, such as by volume, currency, product type and tenor, in a form that will be both timely and meaningful and provide the public with enhanced transparency in this market. Both the public and regulatory data is expected to be made available in the fourth quarter of 2012.


“The rollout of the FX repository caps a busy 12 months for DTCC of designing, developing and implementing global trade repositories for three different classes of OTC derivatives and providing reporting to regulators to monitor that trading and systemic risk globally, as well as greater public transparency,” Macbeth noted. @


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