SIX, Switzerland’s market structure provider, is working with a group of Swiss banks to create a central trade repository (TR) for derivatives transactions.
The planned creation of the trade repository follows international political and regulatory moves to increase transparency in OTC derivatives trading in the wake of the financial crisis.
The Swiss Financial Market Infrastructure Act (FMIA), which is currently in consultation and is set to enter into force in 2015 or 2016, will be the legal framework for the creation of the repository.
The FMIA is the Swiss response to the G-20 group of nations’ decision to reform OTC derivatives markets at its 2009 Pittsburgh Summit. The initiative aims to bring transparency to these markets and improve risk management practices to protect financial stability.
Across the world, regulatory authorities are creating frameworks for the regulation of OTC derivatives reporting, clearing and trade execution.
In the European Union, the European market infrastructure regulation (EMIR), introduced central reporting and clearing of OTC derivatives.
At the end of 2013, six trade repositories were registered under EMIR: ICE Trade Vault Europe; CME Trade Repository; UnaVista, owned by the London Stock Exchange; Regis-TR, a joint venture between Iberclear and Clearstream, Poland’s Krajowy Depozyt Papierów Wartosciowych and DTCC Derivatives Repository.
Mandatory trade reporting of the data on the six TRs did not start until 12 February 12 this year. Both buy- and sell-side were obliged to report OTC and listed derivatives to the TRs. Some aspects of the reporting requirements were not clear and the European Securities and Markets Authority added extra guidelines just the day before reporting began.
The trade repository provided by SIX will record the details of derivative transactions that must be reported by banks and other counterparties.
Following validation and a consistency check, the information collected will be passed on to the supervisory authorities.
The data will also be made public, but in a form which protects the anonymity of businesses involved.