Brokers support derivatives clearing standard

The International Swaps and Derivatives Association (ISDA) has signed up the first four firms to support its initiative to develop standardised reporting for cleared OTC derivatives.

The International Swaps and Derivatives Association (ISDA) has signed up the first four firms to support its initiative to develop standardised reporting for cleared OTC derivatives.

From Monday, most buy-side firms must centrally clear interest rate and credit default swaps as part of the Dodd-Frank Act, and ISDA said creating an industry standard will help to improve reporting and communication between market participants.

The Clearing Connectivity Standard (CCS) has received the support of four of the largest futures commission merchants (FCMs), Bank of America Merrill Lynch, Barclays, JP Morgan and UBS.

ISDA hopes the CCS standard will be used by FCMs to transmit data about cleared OTC derivatives trades and margins to their buy-side clients.

Clearing OTC derivatives has become a major focus in recent months, particularly in the US where the Dodd-Frank Act, which states swaps must be centrally cleared, is currently being implemented.

"As the industry moves to implement mandatory clearing, the absence of a formal standard for formatting and transmitting margin and position data was a significant hurdle to achieving efficient and cost effective connectivity between market participants," said Andres Choussy, global co-head of OTC clearing at J.P. Morgan.

CCS has been developed in coordination with Sapient Global Markets and will help to standardise the market statement reconciliation process. It will streamline client on-boarding and reduce the overall cost and operation risk of reporting in multiple formats, according to ISDA.

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