19 April 2014

Commodity Corner

Guy Weatherall - Rule Financial

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Commodity reporting confusion; which way will regulators go?

31 October 2011  |  2996 views  |  0

The rulemaking under Dodd-Frank and EMIR is a dry dust place, but things are starting to get a bit more real and a bit more interesting...

Back in 2008, G20 specified that OTC derivatives contracts should be reported to trade repositories. The US Dodd-Frank regulations have defined swap data repositories (SDRs) as responsible for collecting this data and has just recently published some rules governing them. In response to this, the industry – primarily the banks – under ISDA have been going through a process of selecting providers for different classes of instrument. 

In the world of commodities, the DTCC and EFETnet were the selected providers, over ICE and the CME Group who were vying for the role. However ICE and CME are still proposing to go ahead with their services.  The ICE Trade Vault service looks interesting as they are proposing to run it off the back of the OTC clearing services which ICE already operates. They will also allow clients to feed it off the widely used ICE eConfirm platform. 

For many existing commodity market players, this will propose a dilemma: back a new industry initiative that will require a new set of interfaces? Or tick the box with ICE and say “please feed my existing data to your warehouse” with limited or no new development work? 

Which way will the regulators go?

  • Will they allow multiple
    repositories for an asset class?
  • Will they only license one in a
    jurisdiction? 
  • Will national regulators sanction national repositories because they object to each others’ rules? (There are many complaints about the US’s indemnity requirements embedded in Dodd-Frank.)

In the meantime, large commodity dealers have to produce interim reports for the CFTC anyway.

These are interesting times in which to be preparing an IT budget for 2012!

 

TagsPost-trade & opsWholesale banking

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Guy Weatherall

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