The International Swaps and Derivatives Association has thrown its support behind an industry standard on over-the-counter (OTC) derivatives reporting and will provide program management, governance and industry oversight for the service.
The clearing connectivity standard (CCS) was developed by service provider Sapient Global Markets to improve reporting and communication for asset managers, futures commission merchants, central counterparties (CCP) and custodians. The service has already been adopted by 12 buy- and sell-side firms, with more expected to join over the next year.
The CCS is a standardised connectivity format that allows simplified reporting of cleared OTC derivatives through integrated data systems. Execution information can be passed between brokers, asset managers and custodians using the format, which was developed to meet stricter clearing requirements for OTC derivatives under a regulatory overhaul to the US swaps market.
Currently, the CCS is used for CCP interest rate and credit default swap products in the US through clearer LCH.Clearnet’s SwapClear and the CME Group. ISDA and Sapient will work together to expand the service across other swaps products and market participants in the next year.
The system will also include a conversion of the Financial products Markup Language, the industry data standard for OTC derivatives and complex products.
Changes to US swaps regulation will force most OTC derivatives trades to be cleared through a CCP under wide-sweeping changes to financial markets as part of the Dodd-Frank Act.
The new rules will force buy-side firms to upgrade their systems and clearing processes, and already there has been a move by larger asset managers firms to reduce OTC derivatives activity in favour of increased futures trading.