The International Swaps and Derivatives Association, Inc. (ISDA), and Sapient Global Markets, a division of Sapient (NASDAQ: SAPE), today announced that four of the largest over-the-counter (OTC) derivatives clearing brokers (known in the U.S. as Futures Commission Merchants, or FCMs) have confirmed their support for the Clearing Connectivity Standard (CCS) initiative to standardize reporting for cleared OTC derivatives.
As part of the Dodd-Frank Act of 2010, the U.S. Commodity Futures Trading Commission (CFTC) has mandated certain OTC derivative products be centrally cleared. June 10 is the second of three CFTC mandated clearing implementation dates for the industry in 2013.
CCS is an industry standard that helps improve OTC derivatives reporting and communication for asset managers, clearing brokers, custodians, and service providers. In 2012, CCS was endorsed by ISDA, which has worked with Sapient Global Markets to further develop the standard for industry-wide adoption. Custodian banks BNY Mellon, J.P. Morgan, Northern Trust and State Street have supported the standard to satisfy reporting requirements.
Today, BofA Merrill Lynch, Barclays, J.P. Morgan and UBS announced their support for the new derivatives reporting standard. The standard is expected to be used by the clearing broker community to transmit information about cleared OTC derivatives trades and margins to their asset manager clients, custodians and service providers. The ISDA CCS Steering Committee and Working Group are composed of the largest and more prominent clearing firms, who represent the core of the industry and also committed to generating the file in due course.
Ray Kahn, Head of OTC Clearing at Barclays, said: "The CCS format will simplify and align margin and portfolio reconciliation process. We're pleased to join the core group of market participants in supporting and adopting this standard, as we see it as a solution that will help to drive post trade efficiencies for our clients."
"As the industry moves to implement mandatory clearing, the absence of a formal standard for formatting and transmitting margin and position data was a significant hurdle to achieving efficient and cost effective connectivity between market participants," said Andres Choussy, Global Co Head of OTC Clearing at J.P. Morgan. "We are pleased that this industry collaboration has successfully produced this standard as this will facilitate operating in the new market environment."
The clearing broker support for CCS is the latest step in an industry push to standardize the OTC derivatives margin statement reconciliation process for all market participants. The adoption of CCS is expected to streamline the client on-boarding process and reduce the overall cost and operational risk associated with managing in multiple disparate reporting formats.
CCS provides standardized connectivity and reporting for central counterparty-eligible interest rate and credit default swap products through LCH.Clearnet, the CME Group, and Intercontinental Exchange. The ISDA CCS Steering Committee is actively working with FCMs and custodians to include additional products, participants, and geographies. Sapient Global Markets provides PMO support for the standard. Other future enhancements considered include conversion of the standard from a CSV template to FpML under the guidance of the ISDA CCS Steering Committee and the FpML Working Groups.