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A service offering of Deriv/SERV, a subsidiary of The Depository Trust & Clearing Corporation 1 03/08/2011 Confidential ACSDA – Derivatives Update 2011.

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Presentation on theme: "A service offering of Deriv/SERV, a subsidiary of The Depository Trust & Clearing Corporation 1 03/08/2011 Confidential ACSDA – Derivatives Update 2011."— Presentation transcript:

1 A service offering of Deriv/SERV, a subsidiary of The Depository Trust & Clearing Corporation 1 03/08/2011 Confidential ACSDA – Derivatives Update 2011 Deriv/SERV LLC Marisol Collazo A service offering of

2 OTC Derivatives - Current Landscape Current Regulatory Landscape focused on 3 key principles: electronic execution, clearing requirements and reporting requirements.  US – Dodd Frank Wall Street Reform Act passed July SEC/CFTC to complete final rules by July 2011  European Market Infrastructure Regulation (EMIR). (End of 2012 for final rules)  G-20 /Financial Stability Board Recommendations  OTC Derivatives Regulators Forum – ODRF – Data Access Guidelines – Trade Repository Functionality Outline 2Confidential

3 What this means for Trade Repositories… Industry coordination is necessary to ensure trade repositories are successful Highest quality data “authoritative data” should be used for regulatory reporting and records shall be kept up-to-date – 95% of CDS trades electronically confirmed; 70% for Interest Rates; and 50% for Equities on MarkitSERV platform. Leverage existing automated processes where possible, e.g. electronic confirmation or legal record-keeping platforms. International standard identifiers for legal entity, swap identification and product are necessary however in and of itself insufficient to ensure aggregation. Market Transparency: Ability to distribute timely information and provide complete aggregate views to public at appropriate level and provide regulatory views both at aggregate and discrete trade level as appropriate. 3Confidential

4 Case Study of DTCC TIW Model…  Background:  DTCC Deriv/SERV in 2003 built an electronic confirmation and matching service for Interest Rates, CDS and Equities. This business was subsequently contributed to a separate joint company – MarkitSERV.  DTCC TIW was established in 2006 to provide legal record keeping and post trade processing service for CDS trades. Today it operates as the global central database for CDS trades and provides for public and regulatory reporting.  DTCC TIW operates as an industry utility and provides open access connectivity to various service providers  DTCC has data centers in both US and Europe (DTCC Derivatives Repository, Ltd. regulated under UK FSA)  Electronic Confirmation stats on MarkitSERV platform 95% of CDS trades electronically confirmed; 70% for Interest Rates; 50% for Equities 4

5 TIW Overview – Diagram Flow 5Confidential MarkitSERV provides confirmation data to the Trade Information Warehouse where the central gold record is established position level data is maintained TIW provides the following post trade lifecycle processes for gold records: – Position Maintenance (Gold Records & record- keeping for copper records) – Payment Calculation – Payment Netting – Credit Event Processing – Settlement TIW provides position extracts to CCP’s, as authorized by participants, to facilitate clearing workflow TIW provides public and regulatory reporting of position data held

6 TIW Public Reporting Warehouse currently operates as the single central global reporting repository for credit derivatives and provides public reporting on the following data. Public Reporting – As of Nov 2008, Weekly reporting of public website of aggregate positions for both cleared and un-cleared trades. – Stock positions, including Top 1000 single name reference entities, Index volumes, and by market sector with gross notional, net notional and contracts. – Weekly turnover: Gross notional, net notional and contracts for transactions in that week that contributed to position change – Market Risk Activity: Weekly report on single name and index trading activity by Gross notional and number of contracts for the specified week, excluding positions that have been modified for event or administrative purposes. – Quarterly Market Risk liquidity analysis reports: A report study produced quarterly of average daily market risk activity trading by clearing members of any clearinghouse against single names (Top 1000) and index volume. 6 Public data can be found on

7 TIW Reporting to Regulators Globally  TIW currently provides standard and ad hoc reporting to all global authorities in support of their regulatory or governmental missions Follows ODRF Guidelines agreed to by all major regulators worldwide – geographically neutral Available data includes trade level detail and detail around all life-cycle events  Reporting requested or discussed by members of the ODRF Monitoring counterparty and position concentrations (current standard reports delivered to EU, Asian and American authorities) Aiding discovery of market manipulation (current ad hoc reporting – over 100 requests responded to worldwide) Monitoring of position limits Flexible parameter-based reporting to facilitate potential systemic risk or market manipulation (i.e., early warning indicators) Parameters specified by requesting ODRF member Filters out massive amounts of “uninteresting” data 7

8 TIW Plans Further enhance regulator portal, on equal terms for full international regulatory community following ODRF guidelines – Direct access capabilities, including direct queries for transaction event data – Currently 20 regulators world-wide subscribed to the service, continue to onboard additional regulators. Data center established in EU for direct access locally – Develop search functionality against EU database as a standalone capability, in case of an event that restricts data transfer from US Extend repository service to other asset classes – US Dodd Frank rules propel major dealers to register trades to a swap data repository for all OTC asset classes (Credit, Equites, Rates, FX and Commodities). EMIR legislation aligning with same scope of coverage. 8Confidential

9 Regulatory Portal Enhancements to the TIW regulatory portal are ongoing in furtherance of ODRF guidelines. ODRF regulators are currently being onboarded with 20 already live in the system. Current regulatory portal functionality includes: – Public reports and standardized weekly reports specific to each regulator in accordance with data needs specified in the ODRF guidelines. – Reports are downloadable in csv format – Historical data reports retained accessible via portal – Standardized reports are based on regulatory entitlements against the participant account or reference entity – Trade level reporting for individual participants and reference entities within a regulators authority updated on a daily basis. 9Confidential

10 Regulatory Portal 10Confidential

11 What this means for CSDs… In light of our US members’ July 2011 deadline from US regulators, we are now working fast to accommodate interest rates, fx, equity, commodity and credit derivatives. CSDs can leverage DTCC TIW open access pipes to send your members’ data to this repository and leverage existing technology for all asset classes. The industry can benefit by leveraging DTCC’s proven ability to efficiently aggregate the data across the entire market, to give the relevant regulators the full-market view they require, at low cost. 11Confidential


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