New standard for OTC derivatives unveiled by Sapient

16 August 2012

Sapient Global Markets is aiming to ease the reporting procedures for asset managers and other market participants dealing in over-the-counter (OTC) derivatives by unveiling a new post-trade industry standard.

The clearing connectivity standard (CCS) is a common connectivity format that Sapient says can be used by market participants to transmit OTC clearing data on behalf of asset manager clients to custodians, regulators or whoever else needs to see it.

The CCS has been developed with custodians and futures commission merchants and Sapient says hundreds of end users in the buy-side community have signed up to use it as it is rolled out. Overcoming the challenges faced by reading, interpreting and managing files sent in different file formats, the CCS will simplify integration with data systems believe the partners and automate reconciliation in order to make clearing and communications more concise and efficient.

Sapient added that 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 on-boarding and increased operational risk, as well as increased cost of interface development and maintenance with each custodian.

The CCS provides standardised connectivity and reporting initially for central counterparty-eligible interest rate and credit default swap (CDS) products in the US via LCH.Clearnet’s SwapClear and the CME Group. Sapient says that there are also plans to expand in the future to include additional products, participants, and geographies over the coming years.

Sapient has defined the common data format and file definitions for account balances, margins and fees, settlements, positions and daily activity by working with its launch partners. The standard has been discussed and well received by the International Swaps and Derivatives Association (ISDA) and Securities Industry and Financial Markets Association (SIFMA) it says, as well as some of its working group members.

Future enhancements to the CCS will include a conversion of the standard to financial products markup language (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 about the on-going governance and oversight of the clearing and communication standard.

• In other news, LCH.Clearnet has proven its commitment ot the US markets by taking over sole ownership of the International Derivatives Clearing Group (IDCG) from NasdaqOMX and various other smaller stakeholders. The deal, which is expected to complete by year end, gives LCH.Clearnet a US registered clearing counterparty and increased market presence.

By Neil Ainger

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development