Sapient sets out new OTC derivatives standard
Trading advisory, analytics and technology provider Sapient Global Markets has developed a new standard for cleared OTC derivatives reporting for asset managers, futures commission merchants and custodians.
The Clearing Connectivity Standard (CCS) is a standardised connectivity format that the buy-side can use to transmit information to custodians. Presently, margin statements reporting trading and collateral activities for clearing swaps are found in a number of different formats and the lack of formal standards can cause undue operational burdens and increase risk.
Reading, interpreting and managing files sent in various formats is simplified by the CCS, which will aid integration with data systems and automate reconciliation to make clearing and communications more efficient. The CCS provides standardised connectivity and reporting for central counterparty-eligible interest rate and credit default swap products in the US through clearer LCH.Clearnet’s SwapClear facility and the CME Group.
Sapient hopes the standardised connectivity format will be used by intermediaries, such as US futures commission merchants, to transmit OTC clearing information to custodians on behalf of their buy-side clients. The standard outlines all message elements which should be universally present in margin statements.
The standardised CCS format will help eliminate the need to spend time and money interpreting and reconciling data from different formats, and drive further automation of the clearing process through the re-allocation of capital into other focus areas. The CCS could reduce the overall costs of clearing swaps for asset managers, which may ultimately increase order demand.
Sapient designed the new standard together with a project group of participants representing some 12 firms and hundreds of end-users on the buy-side.
“The buy-side community will benefit greatly from this initiative, and with Sapient Global Markets at the heart of industry innovation, we recognise the CCS as something that will help many participants for years to come,” said Jim Bennett, vice president at Sapient Global Markets. “With a unique understanding of specific needs of asset managers and futures commission merchants, reporting and operational processes, Sapient Global Markets is uniquely qualified to facilitate this effort.”
In line with G-20 mandates, both Europe and the US have agreed a January 2013 deadline for introducing central clearing and reporting of OTC derivatives trades in a bid to reduce systemic risk in the sector.