The regulatory community is hell bent on increasing transparency into the derivatives market by any means necessary, including forcing OTC instruments to be cleared via central counterparties (CCPs) and requiring firms to report more data to new trade repositories. A-Team Insight speaks to Steve Ingle, derivatives product manager at BNY Mellon Asset Servicing, to find out how all of these changes are impacting the way firms deal with data.
A joint working group of the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organisation of Securities Commissions (Iosco) has published a consultation paper this week setting out recommendations for the operation of trade repositories in the OTC derivatives markets. Data sharing and new data infrastructure is a subject that has been much discussed over recent months (see 
Recent letters between Michel Barnier, the European Commission’s internal market and services commissioner, and US Treasury secretary Timothy Geithner indicate that data sharing is very much at the top of the regulatory agenda at the moment, especially with regards to derivatives. The issue of trade data repositories is at the heart of the debate, as European regulators are concerned that a US-based single repository might not be the right option and multiple repositories may be needed, especially one based in Europe.
Calypso Technology will be focusing on reaching the more traditional end of the buy side spectrum this year, as these firms continue to invest in alternative instruments and seek out a suitable risk management solution provider, explains Dave Wong, senior market specialist at the vendor. Pension funds and the institutional investment community are dabbling more and more in alternatives and they are hard pressed to deal with the risk management challenges and thus need a provider that can cope with the complexity of these instruments, he claims.
Last month, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) got together to hammer out a final definition for the term ‘fair value’. They agreed that it means an “exit price” in most markets, but in illiquid markets or those that are less active this involves the consideration of a number of variables that they have “tentatively” agreed upon. This, of course, has a significant impact on the levels of data that need to be provided alongside each price, but the lack of definitive standards is likely to prove a headache for valuations departments for some time to come.
Following the restructuring of the Fixed Income Risk Management Services (FIRMS) unit to combine its securities evaluations, valuations services and market research teams into one group last month, the Standard & Poor’s owned analytics and research group has launched a new transparency initiative for fixed income valuations. The vendor is now offering the assumptions data underlying its pricing and valuations via the FIRMS Global Data Solutions platform and the FIRMS Global Credit Portal, says Frank Ciccotto, senior vice president of the new Valuation & Risk Strategies group.
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The subject of a European-based trade repository for the credit default swap market has long been a bone of contention between regulators and industry participants in the derivatives market (see, for example, discussions between European Commissioner Barnier and the US Treasury’s Geithner here), but it seems that the Depository Trust & Clearing Corporation (DTCC) is hoping to solve the issue by setting up a new subsidiary on European shores for the market. The DTCC Derivatives Repository Limited will therefore maintain global credit default swap data identical to that maintained in its New York-based trade repository, the Trade Information Warehouse, thus circumventing the possible problem of inconsistent data across jurisdictions (or so the plan goes).
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