The Depository Trust & Clearing Corporation (DTCC) has expressed continued support for legislation that would resolve issues surrounding the indemnification provisions and confidentiality requirements of the Dodd-Frank Act.
During a hearing of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, Chris Childs, chief executive officer, DTCC Data Repository (DDR), reaffirmed DTCC’s support for the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013 (H.R. 742).
The legislation would remove the indemnification provisions from sections 728 and 763 of the law and help ensure regulators continue to have access to a global set of over-the-counter (OTC) derivatives data for systemic risk oversight and mitigation purposes.
Last month, the House Agriculture Committee held a hearing on various legislative proposals, including H.R. 742 and on March 20, the Committee approved the bill with bipartisan support.
“H.R. 742 represents the only viable solution to the unintended consequences of indemnification,” said Childs. “The indemnification requirement is a significant barrier to the ability of regulators globally to effectively utilize the transparency offered by a trade repository registered in the US. We urge Congress to pass H.R. 742 to ensure that technical corrections are addressed and help create the proper environment for the development of a global trade repository system to support systemic risk management and oversight.”
The indemnification provision of Dodd-Frank requires a registered swap data repository (SDR), as a condition to sharing information with an entity – like a foreign regulator – to first receive a written agreement that the entity will abide by certain confidentiality requirements and indemnify the SDR for expenses arising from litigation relating to the information provided. In practice, these provisions are complicated and unworkable.
Childs explained that in order to access the information necessary to regulate market participants subject to their jurisdiction, non-US regulators will be forced to establish national or local repositories to avoid indemnification. This would fragment the current global data and undermine the ability of regulators and the public to obtain a timely, consolidated, and accurate view of the global marketplace.
Last year, DTCC expanded the Global Trade Repository (GTR) in order to support mandatory regulatory reporting requirements for OTC derivatives. The GTR holds data on more than 98 per cent of credit default swaps, 70 per cent of interest rate derivatives and 60 per cent of equities derivatives traded globally. The GTR’s Regulators Portal is leveraged on a regular basis by more than 40 supervisors globally and is the first global service of its kind in the financial marketplace to provide regulators with granular data on transactions that occur within their jurisdictions.
To support Dodd-Frank requirements, DTCC applied for and received provisional registration from the Commodity Futures Trading Commission (CFTC) to operate a multi-asset-class SDR for OTC credit, equity, interest rate, foreign exchange (FX) and commodity derivatives in the US. It is the only repository to offer reporting across all asset classes. In addition, the repository began accepting trade data from market participants on 12 October 2012 – the first day that financial institutions began trade reporting – and was the first registered SDR to publish real-time price information.
DTCC received approval last month from the Financial Services Agency of Japan (J-FSA) to establish the first trade repository to serve the Japanese market. It will support trade reporting across credit, equities, interest rates, and FX derivatives. DTCC began operating ahead of the April 1 deadline for market participants in Japan to begin reporting their OTC derivatives transactions.
