CME applies for European trade repository licence

US-based derivatives exchange CME Group is set to submit an application to the European Securities and Markets Authority in a bid to become a trade repository in Europe.

US-based derivatives exchange CME Group is set to submit an application to the European Securities and Markets Authority (ESMA) in a bid to become a trade repository in Europe.

CME is the latest organisation to seek registration under the European market infrastructure regulation (EMIR), joining at least four others – the London Stock Exchange, IntercontinentalExchange (ICE) Trade Vault, REGIS-TR, and the Depository Trust and Clearing Corporation (DTCC).

"We're finishing off our application, and have just met with ESMA," Jonathan Thursby, COO of repository services at CME Group yesterday told

Under EMIR, derivatives trades must be reported to trade repositories (TRs) – a move that was backed by G-20 countries to provide financial market regulators with readily accessible data to potentially identify dangerous bubbles in the market. The new rules are expected to come into force mid-year.

Market participants in the US also need to report swap trades to swap data repositories (SDRs) – CME, DTCC and ICE Trade Vault – under the Dodd-Frank Act.

Thursby said it was early days to compare the implementation process under EMIR.

But he said ESMA appeared to have stricter timelines than the Commodity Futures Trading Commission (CFTC).

"With the CFTC, … there really wasn't any defined timeline with the process of provisional registration," Thursby said. 

"Whereas in the reporting and application through ESMA, we are working with a certain quantity of days."

A while to wait

ESMA began taking trade repository applications in mid-March, and no decision is expected until at least June.

Twenty business days are allocated to review whether an application is complete, and another 40 days are set for the assessment period. ESMA then plans to take another five days before any decisions are announced.

Among the TR bids, the London Stock Exchange Group has applied for its platform UnaVista to act as TR, while REGIS-TR is a joint venture of central securities depositories Iberclear and Clearstream. ICE Trade Vault, owned by derivatives exchange ICE, is also in the mix.

Stewart Macbeth, president and CEO of DTCC subsidiary Deriv/Serv, said DTCC's US application proved useful in Europe.

"Regulators are very interested in the risk of any commercialisation of the data and how trade repositories manage the conflicts of interest," he said.

They also had questions around how data sharing with regulators would be performed.

"A lot of the functionality of the service was very well developed and we were able to bring that forward as examples."

Macbeth said the list of who is authorised to access the data was different in the US and Europe, with the latter still needing to reach agreements with foreign regulators.

"There is a lot of detail in the technical standards about sharing data with the national authorities within Europe and some of the pan-European authorities.

"The data sharing among EU and foreign regulators is predicated on some level of agreement among those regulators," he said.

Increased tensions

New rules on trade reporting have increased tensions on both sides of the Atlantic, highlighting the competitive battles emerging among repositories for market activity share.

DTCC last month blasted a CFTC decision to approve a CME Group rule that required trades cleared through its central counterparty (CCPs) to also be reported to its data repository.

DTCC said the decision was inconsistent with principles of the Dodd-Frank Act, while CME said it was just enforcing CFTC rules.

Shortly after, ESMA made it clear CCPs in Europe could offer trade-reporting services, but would not be able to force market participants to use their TRs.

It has not set limits on the number of TRs that can apply to register in Europe, however.

While there are currently three SDRs in the US, Europe appears set to end up with more, raising concerns of data fragmentation, which could lead to the opposite of what regulators are trying to achieve.

Macbeth agreed data fragmentation may lead to less effective reform.

"[But] if more providers are able to put forward better solutions at sustainable cost points, then that's good for the industry.

"The problem is that ultimately if there are a lot of providers, it's harder for regulators to pull the data together and make sure it's meaningful because of the issues of duplication and potential omissions."

He said regulators will have to work with all TRs and get data in the same formats – "it could be a pretty big burden on them".

However, Thursby said competition would be good for market participants, and it would be no harder for regulators.

"It's very usable number, we are taking single digits. It's not an issue," he said. "I know [fragmentation] is part of the narrative, but the regulators are equipped to take in multiple sets of data."

Thursby said ESMA had about 85 standard sets of data fields that repositories needed to confirm to. "That's the same blue print that all of the trade repositories are working from".