BI Reporting Requirements for over-the-counter (OTC)
by DODD-FRANK Regulators - Part 1
Compiled by Suvradeep rudra
New reporting and record keeping rules generally distinguish between two categories of information
ü Swap creation data (such as the primary economic terms of the swap and confirmation data.
ü Swap continuation data (such as event data, valuation information and term changes.
· Swap execution facilities (“SEFs”)
· Designated contract markets (“DCMs”)
1. TOP SWAPS
a. Top 10 record (Swaps ) in $ values for the Day
b. Top 10 record (Swaps ) in $ values for the Month
c. Top 10 record (Swaps ) in $ values for the Qtr
Requirements:
Reports should include following columns
i. Unique Counterparty Identifier (UC )
ii. Unique Swap Identifier (USI)
iii. Unique Product Identifier (UPI)
iv. Start Date
v. Expiration date
vi. $ amount
Ø The UCI would identify the legal entity that is a counterparty to a swap. Under the proposed rules, the Commission would require use of UCIs in all swap data reporting.
Ø The Unique Swap Identifier (USI) called for by the proposed rules would be created and assigned to a swap at the time it is executed, and used to identify that particular swap transaction throughout its existence.
Ø The Unique Product Identifier (UPI) called for by the proposed rules would categorize swaps according to the underlying products referenced in them. While the UPI would be assigned to a particular level of the taxonomy of the asset class or sub asset class in question, its existence would enable the Commission and other regulators to aggregate transactions at various taxonomy levels based on the type of product underlying the swap.
2. Reporting of Swap Creation Data – Executed on a Platform
The Dodd-Frank Act lays the foundation, defining a SEF to be "a facility, trading system or platform in which multiple participants have the ability to execute or trade swaps by accepting bids and offers made by other participants that are open to multiple participants in the facility or system, through any means of interstate commerce."
The expected role of a SEF is to provide pre- and post-trade transparency, encourage competitive execution for the entire institutional marketplace, and provide the tools required to ensure a complete record and audit trail of trades. There could be a significant shift in the way derivatives trading is ultimately executed, and Tradeweb has made great strides to be ahead of the curve for our clients.
Legislative bodies in the U.S. and Europe are moving to increase regulation of the over-the-counter (OTC) derivatives market. These global financial reform initiatives seek to achieve three key objectives for the OTC derivatives markets:
· Increase transparency
· Improve market efficiency
· Prevent market abuse
How Derivatives are Currently Traded
Over-the-counter, or "privately negotiated", derivatives are currently traded on the telephone and increasingly on electronic markets, such as Tradeweb. There are two sectors of the market: institutional dealer-to-client (D2C) and inter-dealer (D2D). These markets are approximately the same size in terms of trading volumes, but there are many more participants in the D2C marketplace than D2D.
Reporting Counterparty
ü Swap Dealers (SD) and Major Swap Participants (MSP)
ü Non-SD/MSP Counterparties
Ø Report 1 - Executed on a platform and cleared
Ø Report 2 - Executed on a platform and not cleared
Ø Report 3 - Not executed on a platform and cleared
Ø Report 4 - Not executed on a platform and not cleared
Ø Report 5 - Credit and Equity Asset Classes – Cleared
Ø Report 6 - Credit and Equity Asset Classes –Not Cleared
Ø Report 7 - Interest Rate, Currency, and Other Commodity Asset Classes – Cleared
Ø Report 8 - Interest Rate, Currency, and Other Commodity Asset Classes – Not Cleared
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