Derivatives trades will be tracked by Depository Trust

LONDON--(BUSINESS WIRE)--The Depository Trust & Clearing Corporation (DTCC) announced today two significant developments: 1) the launch of its Equity Derivatives Reporting Repository (EDRR) and 2) FSA approval of DTCC Derivatives Repository Ltd subsidiary.

“We look forward to expanding our work with DTCC in this arena to help the industry meet its objectives.”
The building of the EDRR repository, follows a competitive request for proposal process (RFP) led by the International Swaps and Derivatives Association (ISDA) last year, and represents the industry's efforts to strengthen its operational infrastructure and improve transparency across all major OTC derivatives asset classes. All of the 14 global market dealers are now live on EDRR.

EDRR’s central registry will hold key position data, including product types, notional value, open trade positions, maturity and currency denomination for participants’ transactions, as well as counterparty type. OTC equity derivatives products the service will initially support include options; equity, dividend, variance and portfolio swaps; CFD (contracts for difference); accumulators and a final category covering other structured products.

By aggregating and maintaining the data, DTCC’s EDRR will generate reports that keep industry participants and regulators up to date on the industry’s outstanding notional and positions as well as other position related information through a single, secure, easy-to-access portal.

"DTCC played an important role in bringing this new service to market over an aggressive timeframe, allowing the OTC derivatives community to meet commitments made to global regulators to have a repository service running for equity derivatives by the end of July," said Patrick Dempsey, managing director and CFO, Global Equity Derivatives Group at J.P. Morgan and chairman of the International Swaps and Derivatives Association's (ISDA’s) Equities Steering Committee, EDRR subgroup.

In addition, DTCC announced that its new European subsidiary, DTCC Derivatives Repository Ltd (“DTCC Derivatives Repository”) has received UK Financial Services Authority (FSA) approval to operate as an FSA regulated Service company. This new subsidiary will jointly house the global equity derivatives repository and will maintain global credit default swap data identical to that maintained in its New York based Trade Information Warehouse. The move is, in part, intended to help ensure that regulators globally have secure and unfettered access to global data on credit default swaps (CDS) by establishing identical CDS data sets on two different continents.

DTCC also operates the global repository for credit default swaps (CDS) through its U.S. regulated subsidiary Warehouse Trust Company LLC. An identical set of this global CDS data will now be maintained in the London-based DTCC Derivatives Repository.

“It is very common for counterparties to be located on different continents and to trade on underlying securities issued across borders,” said Stewart Macbeth, Managing Director and General Manager, Trade Information Warehouse. “We felt that steps needed to be taken to ensure that the data is always available to regulators globally regardless of events and circumstances taking place in one location or another.”

How the Equity Derivatives Reporting Repository Works

Participating firms are responsible for loading all their open third-party positions in the repository. DTCC is responsible for managing the data, and providing reports to regulators and participants. MarkitSERV will provide operational support, including account management, on-boarding and customer service, and other product management services.

Reporting to Regulators

On a monthly basis, DTCC will provide both the designated regulators and participating firms with a series of summary reports on the position data. DTCC will create and make available three different reports:

  • A Participant Report showing a summary of the open positions for each individual organization;
  • An Aggregate Report showing a summary of the aggregate positions for the firms that have the same designated regulatory authority (Regulators Only); and
  • An Industry Report showing a summary of the aggregate positions for all trading parties.

These reports will contain repository data which includes gross notional and number of position by product, counterparty type, local currency and maturity profile.

“We are pleased to be now bringing the transparency and risk mitigation benefits of a central repository for the OTC equity derivatives market,” said Bill Stenning, managing director, DTCC DerivSERV Business Development. “DTCC has been working in the OTC derivatives market for nearly a decade and we have demonstrated our ability to bring automation and trade reporting services, working with the OTC derivatives community and regulators, to establish the global repository and post-trade processing infrastructure for the CDS market. ”

“MarkitSERV is committed to helping the industry increase transparency and mitigate risk and we are very pleased to assist the DTCC in providing this valuable service for the OTC equity derivatives market," said Gina S. Ghent, managing director and head of equity derivatives at MarkitSERV. "We look forward to expanding our work with DTCC in this arena to help the industry meet its objectives."

EDRR’s strategic direction and operation was developed and guided by the ISDA Equity Steering Committee in conjunction with DTCC who was selected by the industry along with MarkitSERV, to build this new global service. It is a direct result of the commitments to improve market transparency that 14 major dealers, buy side firms and industry trade associations made to global regulators in June 2009.

About DTCC

DTCC, through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC's depository provides custody and asset servicing for more than 3.6 million securities issues from the United States and 121 other countries and territories, valued at US$33.6 trillion. In 2009, DTCC settled nearly US$1.48 quadrillion in securities transactions. DTCC has operating facilities and data centers in multiple locations in the United States and overseas.

Comments
comments powered by Disqus