Data service provider Duco has launched a new tool for reference data control, clean-up and reporting to help market participants comply with derivatives regulation.
Duco
Cube Static Control is aimed at making it easier to match static data across internal
or external systems, which has become increasingly important because of derivatives
rules under the European market infrastructure regulation (EMIR) and the US
Dodd-Frank Act.
Christian Nentwich, CEO of Duco, said the new product was launched as a result
of growing demand. “We’ve bumped into firms with problems with data across
multiple systems,” he said.
“What Duco Cube Static Control does is allow clients to control things like the legal entity identifier, identify duplicates and generally lock down static data across the firm.”
Nentwich said that the new tool is mostly targeted at sell-side firms, which are reporting trades on behalf of the buy-side, but large institutional investors would also find it useful.
Market participants in Europe have been reporting derivatives trades to one of six trade repositories under EMIR since 12 February. Although responsibility falls on both sides of the trade to report, a number of buy-side firms have decided to delegate reporting to brokers and clearing members.
Nentwich said many people find static and reference data a “very boring problem, but it’s costing a lot of money”.
“It’s not something that we particularly wanted to do. It’s just a response to customer demand.”
Unexpected volume
Speaking at a Duco-hosted breakfast, Danny Corrigan, CEO of CME’s European Trade Repository, said the volume of trades being reported since the rule took effect was surprising.
“We know how many trades are in the market; we can look at some of the OTC numbers out there and get an idea – but the numbers are enormous,” he said.
Corrigan noted the make-up of trades, saying most people expected to see a lot of rates, FX, credit and equities, but the big surprise was the number of commodities trades.
He said despite reports in the press highlighting hiccups during the kick-off of the reporting rule, it had “worked really well”.
“The stories you’ve heard about onboarding, files that have been sent and recognised and the sheer load are true,” he said.
“But all the trade repositories have worked together. We exchanged files, and by and large that has worked.”
Sandy Broderick, CEO of Depository Trust and Clearing Corporation’s Deriv/Serv, said the repository has been processing about 120 million messages a week.
But data coming from counterparties is not uniform, and the notional amount can be interpreted and reported differently. “What does notional mean in a commodities trade? Notional can mean a lot of different things to people," Broderick said.
“For example, take an exotic swap that’s got four times leverage in it, what’s the notional in that? Is it bushels or grams or pounds? It's not a case of simply adding the data together - it takes analysis.”
Broderick said interpreting the data would be one of the biggest challenges for regulators. “The big thing going forward is to achieve what regulators wanted, which is to understand the risks in the market.”