Reuters: Regulatory News: UPDATE 1-Swap ID system clears hurdle with CFTC OK of ID plan

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UPDATE 1-Swap ID system clears hurdle with CFTC OK of ID plan Jul 24th 2012, 20:00 Tue Jul 24, 2012 4:00pm EDT By Sarah N. Lynch WASHINGTON, July 24 (Reuters) - U.S. regulators came one step closer on Tuesday toward their goal of tracking the biggest players in the $650 trillion swaps market after they gave regulatory approval to a plan that will tag each trader with a unique identifying number. The Commodity Futures Trading Commission said it had signed off on an interim plan submitted jointly by the Depository Trust and Clearing Corp (DTCC) and SWIFT, which will be charged with providing the identifiers for over-the-counter derivatives traders such as Goldman Sachs and Morgan Stanley. The Dodd-Frank Wall Street reform law of 2010 laid out a new regulatory regime for the over-the-counter derivatives market. One of its key pillars requires all swaps trading data to be reported to central repositories so that regulators can get a better window into the opaque marketplace. The use of unique identifiers will help regulators better track the activities of big financial institutions and give them a better sense of the exposure that major financial institutions have through their derivatives trades. The DTCC, a market utility that offers clearance and settlement services, is vying to take advantage of new business opportunities from the Dodd-Frank law. In addition to providing the identifiers for market players, it also has applications pending before the CFTC to serve as a swap data repository for a variety of derivative asset classes. SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a member-owned cooperative that provides communications platforms and other services to financial institutions. "We are pleased that the CFTC has recognized the strength and immediate readiness of the DTCC/SWIFT proposal," said DTCC CEO Michael Bodson, adding that he expects DTCC and SWIFT to move "rapidly" to carry out the plan. Tuesday's regulatory approval lets DTCC-SWIFT provide the legal entity identifiers on an interim basis until the CFTC eventually moves to using a global system that will help to aggregate derivatives data. That program is not expected to be ready until about March 2013. The CFTC said DTCC-SWIFT is the only venture that is able to satisfy all of the agency's swap data reporting rules and be ready in advance of initial compliance dates. The designation will be in place for a limited term of two years. The DTCC said in a release it has already assigned and validated 24,000 provisional I.D.s for various entities involved in over-the-counter derivatives trading. In addition to teaming up with the DTCC to provide legal entity identifiers, SWIFT and the DTCC are also working together to develop a data repository for foreign-exchange derivative trades. Exchange operator IntercontinentalExchange, one of the DTCC's competitors in the derivatives data arena, is so far the only company to receive provisional registration approval from the CFTC to operate a swap data repository, known as ICE Trade Vault. Link this Share this Digg this Email Reprints

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