The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

DSB Final Fees for ISINs for OTC Derivatives Higher than Expected

The Derivatives Services Bureau (DSB) set up to create ISINs required for OTC derivatives under Markets in Financial Instruments Directive II (MiFID II) has finalised fees for user contracts running from October 2, 2017 to December 31, 2018. It notes, ‘we are mindful that the smaller than expected number of users contributing to the DSB’s cost recovery results in an increase in individual user fees’.

Explaining the higher than expected user fees, the DSB, a subsidiary of the Association of National Numbering Agencies (ANNA), says a large number of investment firms have subscribed to the DSB’s free data services, which enable OTC ISIN lookups and downloads. Some trading venues, which originally discussed subscribing multiple Multilateral Trading Facilities (MTFs) and Organised Trading Facilities (OTFs) as fee-paying Power Users with the DSB, have so far contracted significantly lower numbers.

User fees recover the DSB overhead costs. The total annual overhead on which the cost-recovery fees were calculated is €9.2 million, which is 4.8% higher than the €8.8 million previously stated. The additional sum reflects development and operating costs identified in Q4 2017 by regulatory imperative and industry requests.

The fee calculation was based on contracts in force as of January 5, 2018 and the user categories those contracts represent (see table below). Excess revenues caused by additional contracts signed after January 5, 2018 will go to defraying user fees for the next contract year.

User Numbers

The difference between the preliminary annual fees compared to the final annual fees are as follows:

User type Contracted firms 5 Jan 2018 Preliminary annual fees Final annual fees
Registered 205 Free free
Infrequent 15 €3,000 €3,000
Standard 10 €22,000 €37,500
Power 78 €65,000 €112,500

The current proportion of cost-recovery payments by business sector is as follows:

Sector #Firms Total Value %Cost Recovery
Investment Banks 56 €4,942,500 54%
Trading Venues 32 €3,009,000 33%
Other sectors including Asset Management and Data Management 15 €1,243,500 13%

Adding to the comment above about the increase in individual user fees, Emma Kalliomaki, DSB managing director, says: “We believe that all the user numbers will continue to grow. We are continuing to receive new inquiries for the DSB paid-for services from firms that are just realising they will be creating OTC ISINs, and we expect new users with the increase in systematic internalisers later in the year.”

On cost-recovery payments by business sector, she says: “The proportionately higher participation of banks, relative to trading venues in the cost recovery, validates the design of the OTC-ISIN as internally useful for business operations beyond satisfying reference data reporting obligations under MiFID II. In 2018, we will continue our collaborations with industry to ensure the DSB receives appropriate guidance on industry’s evolving needs.”

Later this year, the DSB will reopen the fee model consultation with the industry. The objective will be to refine the cost-recovery model for 2019, considering the data and usage patterns established in 2018.

Related content

WEBINAR

Recorded Webinar: How to run effective client onboarding and KYC processes

Increasing cost, complexity and regulatory change continue to challenge firms implementing client onboarding and Know Your Customer (KYC) systems. With an effective strategy and a clearly defined pathway, it’s possible to gain a valuable competitive advantage whilst meeting those all-important compliance requirements. But how to get there? With a myriad of different options out there...

BLOG

MarketAxess Acquires Regulatory Reporting Hub From Deutsche Börse

Electronic trading giant MarketAxess, which also provides market data and post-trade services for the global fixed income markets, today completed the long-awaited acquisition of Regulatory Reporting Hub, the regulatory reporting business of Deutsche Börse Group. MarketAxess acquired the business through Trax, its wholly owned subsidiary in the Netherlands, on November 30, 2020. The deal was...

EVENT

RegTech Summit APAC

RegTech Summit APAC will explore the current regulatory environment in Asia Pacific, the impact of COVID on the RegTech industry and the extent to which the pandemic has acted a catalyst for RegTech adoption in financial markets.

GUIDE

Regulatory Data Handbook 2020/2021 – Eighth Edition

This eighth edition of A-Team Group’s Regulatory Data Handbook is a ‘must-have’ for capital markets participants during this period of unprecedented change. Available free of charge, it profiles every regulation that impacts capital markets data management practices giving you: A detailed overview of each regulation with key dates, data and data management implications, links to...