DTCC shines spotlight on OTC derivatives standards, data collection

The Depository Trust & Clearing Corporation’s latest report highlights the current challenges that remain for creating a globally recognized framework for reporting for over-the-counter derivatives trades. Effective monitoring, data consistency and aggregation are key hurdles.

A Progress Report on OTC Derivatives Trade Repositories: Many Miles Travelled, More Yet to Go recommends the use of the latest technologies and the creation of global data standards.

“The industry has made significant strides in launching a global derivatives trade reporting framework following the global financial crisis, providing derivatives market transparency neverbefore seen. However, we still have work to do to fully deliver upon G20 objectives,” said Val Wotton, managing director, DTCC Deriv/SERV. “For fifteen years, DTCC has operated its Deriv/SERV business, interacting closely with market participants, industry associations, standard-setting bodies and regulators. We look forward to further collaboration with the industry to continue to enhance the service to meet evolving industry and regulatory needs.”

The report acknowledges progress toward G20 goals, especially in the areas of standards development and data sharing, but more needs to be done. “The industry must implement consistent standards globally or, alternatively, normalize data in accordance with prescribed standards. Then the industry will be able to further reduce operational risks, costs and improve the value of the data for all that need to use it,” said Chris Childs, DTCC president and CEO.

The report highlights the potential of distributed ledger technology to transform reporting, including recommendations for how the industry can best integrate a reporting framework covering OTC derivatives transactions worldwide. The creation of standards is a key step toward leveraging distributed ledger technology and the creation of a global, searchable databases for regulators.

The study cites the credit default swaps market as a proven model for creating a global record warehouse for the collection of CDS transactions as a “golden source” of record. The Hyperledger Project and the International Swaps and Derivatives Association’s Common Data Model are also noted in the report as positive steps toward the standardization within the industry. DTCC is a founding member of the Hyperledger Project.