Sapient Global Markets has completed a new industry standard for cleared OTC derivatives related activity reporting for asset managers, futures commission merchants (FCMs) and custodians.
The Clearing Connectivity Standard (CCS) is a standardised connectivity format that can be used by the FCM community to transmit OTC clearing related information on behalf of their asset manager clients to custodians.
As industry regulatory reform emerges, both the volume of cleared derivative trades and the number of relationships between market participants is growing. The absence of a formal standard for formatting or transmitting data between entities can create delayed onboarding and increased operational risk as well as cost of interface development and maintenance with each custodian.
Sapient Global Markets collaborated with most of the leading FCMs and custodians to develop the CCS, which has been adopted by the original project group of participants representing more than 12 firms and hundreds of end users in the buy-side community.
Overcoming the challenges faced by reading, interpreting and managing files sent in different file formats, the CCS will simplify integration with data systems and automate reconciliation in order to make clearing and communications more concise and efficient. It provides standardised connectivity and reporting initially for central counterparty-eligible interest rate and credit default swap products in the US through LCH.Clearnet SwapClear and the CME Group, with plans to expand to include additional products, participants, and geographies over the next year and beyond.
Working with project sponsors from across the industry, Sapient Global Markets facilitated the definition of the common data format and file definitions for account balances, margins and fees, settlements, positions and daily activity. The standard has been discussed and well received by the International Swaps and Derivatives Association (ISDA) and Securities Industry and Financial Markets Association (SIFMA), as well as some of its working group members.
“The buy-side community will benefit greatly from this initiative, and with Sapient Global Markets at the heart of industry innovation, we recognise the CCS as something that will help many participants for years to come,” says Jim Bennett, managing director at Sapient Global Markets. “With a unique understanding of specific needs of asset managers and FCMs, reporting and operational processes, Sapient Global Markets is uniquely qualified to facilitate this effort.”
Future enhancements to the CCS will include a conversion of the standard to FpML on a real-time basis under the guidance of FpML working groups and additional product coverage. The intent is to also broaden the range of participants to include additional FCMs, custodians, asset managers and CCPs. Discussions are continuing with ISDA on ongoing governance and oversight of the clearing and communication standard.