The rise of over-the-counter (OTC) derivative clearing requires report standardization among clearing brokers, custodians, service providers and asset managers. Historically, the margin statements provided to report trade and collateral activities for cleared swaps could be found in any number of different formats. The lack of formal standards for formatting and transmitting this data has increased both the risk and operational burden for all firms involved.
The ISDA Clearing Connectivity Standard (CCS)
ISDA CCS is a new industry standard for margin statements that was developed through collaborative conversations with clearing brokers, service providers and custodians. ISDA CCS establishes a standardized connectivity format that can be used by the clearing broker community to transmit cleared OTC derivative related information to their asset manager clients and service providers. It outlines all of the message elements that should be universally present in margin statements, such as balances, requirements and product cash flows.
Not only does the agreement to utilize ISDA CCS signal a collective industry investment in improving the swaps clearing process, but the standard itself also helps to:
• Eliminate the need to spend time and money on interpreting and reconciling data from different formats
• Drive further automation of the clearing process through the re-allocation of capital into other focus areas
• Reduce the overall costs of clearing swaps for asset managers, which may ultimately increase order demand
Solutions for ISDA CCS
As an integral player in establishing ISDA CCS, Sapient Global Markets continues to provide PMO support to the ISDA CCS steering committee. We have also developed solutions that help firms more easily and effectively build ISDA CCS into their business processes.
CCSV—Sapient Global Markets’ CCS Validator (CCSV) provides participants with a validation tool to speed up report testing and decrease the time investment required to train internal development teams. Delivered as a downloadable standalone executable, CCSV runs within the broker’s firewall allowing the tool to securely check sensitive client information. CCSV examines report format and structure, headers, field formats and expected logical/arithmetic relationships to ensure they adhere to ISDA CCS specifications and pre-programmed business rules.
CCSi—Managing the operational risk posed by a shift in reporting formats to automated systems will be key as the derivative markets and regulatory landscapes continue to change over the next two to four years. A custom-built tool, Sapient Global Markets’ CCSi provides an accelerator for ISDA CCS report creation that transfers the risk of such changing formats from the CCSi user to Sapient.
CCSi offers a data mapping infrastructure that can gather data from a client firm’s front, middle and back office systems and map them to the ISDA CCS Data Dictionary using a visual interface. The tool can also receive incoming CCS reports and accurately map that data into recipient systems. In addition, as reporting formats change, CCSi ensures valid inputs and outputs are produced.
The solution is offered on a modular basis to give users the flexibility to leverage only the systems they need.
• Report Creation Module—compiles and formats ISDA CCS reports from the Data Dictionary, offering version control on a client-by-client basis.
• Custom Report Module—allows users to change the report output for client report customization.
• Reconciliation Module—uses the Data Mapping GUI to pull in client position statements and automatically reconcile them to broker ISDA CCS data. Reconciliation parameters can be customized with error tolerance.
• Custom Intake Module—allows users to map custom, non-ISDA CCS broker files into the ISDA CCS Data Dictionary for reconciliation.
• Improve processes—We standardized the data universally present in margin statements, including fields, headers and descriptions for more consistent formatting and transmitting
• Minimize risk—By aligning formats and automating processes, we help minimize the risk associated with inconsistent data and manual approaches
• Reduce costs—We eliminate the need to spend time and money on interpreting and reconciling data from different formats