Wednesday, March 24, 2010

DTCC to provide counterparty-specific CDS data to regulators

Posted in the Financial Times by Aline van Duyn:

A transatlantic row that flared up in the wake of the Greek debt crisis over the lack of disclosure to regulators of credit market activity has pushed the new body in charge of collecting global trading data to provide more information to financial watchdogs.

Regulators from around the globe including the Securities and Exchange Commission will now be able to obtain breakdowns of trading activity in credit default swaps, including the identity of the investors.

This follows a U-turn by the DTCC Trade Information Warehouse, a body set up in the wake of the financial crisis to allow regulators to track positions and trading in over-the-counter credit derivatives.

Regulators involved in the dispute said the DTCC had initially resisted making available such details on Greek CDS, a type of insurance against the risk of debt default. Speculation in these instruments has been blamed by European politicians for heightening the Greek debt crisis.

Some European regulators were so concerned about being unable to obtain data to determine whether investors were manipulating markets that they were planning to call for a rival credit derivatives data collector in Europe, according to people involved in the discussions.

The DTCC said this was not an issue, however. ”It is a bedrock principle of the warehouse that all interested regulators should have unfettered access to warehouse information necessary in furtherance of their respective regulatory missions,” the letter said.

The DTCC Trade Information Warehouse was set up as a not-for-profit co-operative run by the Depository Trust & Clearing Corporation, the large provider of post-trade services in charge of clearing activities in the US.

In a letter sent to regulators last week and seen by the Financial Times, the DTCC said that “regulators and other governmental entities can expect that, upon the formal request of any regulator, counterparty names will be included in both aggregate and trade-level information provided by the warehouse”.

The DTCC had previously agreed with the banks and dealers that provide trade information that it would not reveal details of counterparties unless they had their explicit consent.

“There is always a balance between customer confidentiality and regulatory interests,” said a DTCC spokesperson. “In light of recent events, it has shifted slightly.”

The rules governing the sharing of trading information in OTC markets are still being worked out.

Download the DTCC press release here: www.ft.com/cms/31930778-36c7-11df-bc0f-00144feabdc0.pdf

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