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Timelines for CICI Compliance

by Steve Letzler

In a move that will help regulators and the industry quickly identify parties to over-the-counter (OTC) derivatives trades, DTCC and SWIFT have launched a new web portal and utility to begin assigning CFTC Interim Compliant Identifiers (CICIs) to firms trading in OTC derivatives. In July, the U.S. Commodity Futures Trading Commission (CFTC) selected DTCC and SWIFT to take on this role, making the CFTC the first global regulator to require the use of an identifier.

“The assignment of CICIs is an important step forward in managing systemic risk in the OTC derivatives markets,” said William Hodash, DTCC Managing Director, Business Development. “We already have more than 24,000 CICIs assigned and validated, and are prepared to begin issuing additional identifiers immediately, in accordance with ISO 17442 standard, which calls for use of a 20-character alphanumeric identifier.”

The CFTC awarded the CICI mandate following a competitive proposal process. The new portal is available at Included on the site are instructions for searching and downloading the database, registering entities for CICIs, certifying the reference data for legal entities already assigned a CICI, public challenges of reference data and other information, including answers to frequently asked questions and, for information not available on the site, a customer service email box to send questions.

Tackling systemic risk

Identification of legal entities is recognized as a critical element to aid global regulators and financial market participants alike in measuring and managing systemic risk. The requirement to provide an identifier is prominent in regulatory rulemaking around the globe as a key data element needed in OTC derivatives reporting. The use of legal entity identifiers (LEIs) is also emerging in other regulatory data collection rulemaking proposals.

To assign identifiers to firms involved in OTC derivatives trading, the CFTC announced plans earlier this year to designate a CICI utility that would ultimately comply with the global framework for an LEI from the Financial Stability Board (FSB) and the Group of 20 nations (G20). As such, CICI will be fully compliant with the ISO 17442 LEI standard recommended by the FSB. What’s more, because the CFTC mandated identifiers before the launch of the global LEI program, DTCC and SWIFT designed the CICI data so that it will easily transition to the global LEI when that program takes effect.

‘First step’ toward LEI

“SWIFT is very pleased to have been chosen to work on this interim program with DTCC to provide the CICI for firms subject to CFTC jurisdiction. We look forward to moving ahead with this first step to the global LEI solution,” said Paul Janssens, SWIFT LEI Program Director. “We are continuing to work with regulators and the industry globally to provide a fully formed and practical solution to solve the LEI challenge. This includes further work to evolve the solution to a federated data contribution and validation model over time.”

An interim solution

DTCC and SWIFT established a new, at-cost utility to implement and fund activities for the CICI, and the two companies will serve as the utility’s service providers.

DTCC, SWIFT and GFMA will continue to work closely with the FSB as the regulators move towards consensus on a global implementation of LEI. The FSB recommended to the G20 that an Implementation Group be formed to implement a solution by March 2013. A Regulatory Oversight Committee was also recommended by the FSB to oversee the operations of the LEI solution on an ongoing basis.

The financial services industry plans to work closely with the FSB Implement-ation Group with the hope that the solution and expertise behind the CICI utility for the OTC derivatives market can be leveraged in the evolution of the global system.

It is anticipated that the CICIs assigned by DTCC and SWIFT will become LEIs after the global LEI system designed through the FSB process is launched, regardless of which firms the FSB selects to serve as the central operating unit for the LEI.

It is important to note that while the financial services industry expects as many as 1.5 million legal entities that are counterparties on financial transactions across all asset classes globally to receive LEIs, the implementation of the CICI is targeted at a much smaller subset of legal entities that are active in OTC derivatives markets. The number of such entities is estimated to be less than 50,000.

Inside the CICI utility portal

The website created by DTCC and SWIFT builds on the test files of the provisional LEIs provided to the industry, beginning in February 2012. It now contains the full database of such identifiers assigned to date, some 24,000 legal entities, heavily weighted towards those involved in OTC derivatives trading.

The identifiers are now called CICIs and of the more than 24,000 CICIs already assigned and validated, there are firms from some 80 countries, according to Hodash.

Firms that are required to have CICIs according to the requirements of the CFTC’s Swap Recordkeeping and Reporting Rule (Part 45) should check the search capability of the portal to see if a CICI is already assigned to them and, if so, certify (or confirm) the accuracy of some basic information about their legal entity. If they are not listed in the database, firms should self-register, supplying the necessary reference data, including the formal name of the entity, its address and jurisdiction, among other items.

The site will also allow financial insti-tutions to register their counterparties for a CICI. This feature is especially useful in the early days of implementation, as dealers write swap contracts that are required to be reported to registered swap data repositories with CICIs identifying themselves and their counterparties. If a counterparty has not registered for a CICI, the dealer can obtain a CICI for it within minutes and include that with its transaction submission to the SDR.

The CICI Utility will make all its data freely available to all, with no fees for searching or downloading the database. And there are neither licenses nor restrictions on redistribution of the data. Thus, all firms and vendors are welcome to utilize the content as they wish with no charges.

Fees are charged for registrations to fund the development, maintenance and operations of the Utility. The initial registration charge for self-registrations, third-party registrations and certifications is US$200 per legal entity. A $100 per year maintenance fee will be charged to each legal entity as well. @