CFTC computers crashing under weight of new swaps data

CFTC computers crashing under weight of new swaps data

New swaps data reporting rules have left the Commodity Futures Trading Commission (CFTC) floundering in a sea of data, its computers crashing under the strain, claims one of the watchdog's own commissioners.

Under Dodd-Frank, the CFTC recently introduced rules meaning that traders now have to report all OTC trades to Swap Data Repositorys (SDRs) run by third parties such as the DTCC.

However, in a speech, Republican CFTC commissioner Scott O'Malia, claims that his agency bungled the plans, failing to specify the data format reporting parties must use when sending their swaps to SDRs.

"In other words, the Commission told the industry what information to report, but didn't specify which language to use. This has become a serious problem," he told an audience at a Sifma seminar.

The multitude of languages is only half the problem, says O'Malia, revealing that the CFTC's IT systems are failing to cope with the new data it is receiving on thousands of swaps each day.

The commissioner claims that "none of our computer programs load this data without crashing. This would seem odd with such a seemingly small number of trades. The problem is that for each swap, the reporting rules require over one thousand data fields of information."

The problem is so bad that the watchdog cannot even find JPMorgan's massive $6.2 billion 'London whale' loss on credit default swap trades in its data files.

O'Malia warns that until his organisation starts receiving more uniform file transfers and beefs up its IT so this data can be analysed, the new rules will do nothing to help improve market surveillance.

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 23 March, 2013, 09:35Be the first to give this comment the thumbs up 0 likes

First, it will be lack of data. Then, it will be wrong format of data. At last, it will end with too much data. There's no way such frauds can be detected before the fact unless they carry a placard advertising themselves as such. This is not so much a reflection of the capabilities of surveillance agencies as the innate complexity of CDS and other structured financial products. Just struck me that the card industry hasn't achieved 100% foolproof fraud detection before the fact despite such systems being in existence for over a decade and the relative simplicity of a credit card transaction.

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