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Virginie’s Blog – The Coming of the Regulatory Data Empire?

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Not only has the Swift/Depository Trust and Clearing Corporation (DTCC) alliance been backed this week by a Sifma led industry coalition group to act as the issuer and registration authority for the new legal entity identification standard, but the partners have also received the support of a number of these same associations to establish a new global FX trade data repository. Given DTCC’s apparent intention to become the regulatory data infrastructure of choice – see its credit default swap (CDS) regulatory portal launch back in February and its recent teaming with EFETnet for the commodities market for further proof – Swift’s decision to throw its lot in with the US-based clearing, data and technology firm seems to be a savvy move at a time when it’s reinventing its commercial strategy.

The backing of the Global Foreign Exchange Division, which includes involvement from the Association for Financial Markets (AFME), Sifma and the Asia Securities Industry and Financial Markets Association (ASIFMA), for Swift/DTCC to set up a new trade data repository for the global FX markets was announced yesterday (whereas the LEI announcement came out on Friday last week). Given that FX settlement infrastructure provider CLS Group ruled itself out of the running to operate a data repository earlier this year, it was a much simpler choice for those involved (unlike the 21 bids on the entity ID front).

The idea behind the new FX repository, according to James Kemp, managing director of the Global Foreign Exchange Division, is that the regulators will have “access to the maximum amount of data and that market participants of all sizes are not overburdened with multiple reporting formats.” Sound familiar?

It is also another string to add to the partners’ ever-increasing data bow and indicates the potential that both parties see in the regulatory infrastructure space. No wonder DTCC has been on a significant hiring spree over the last few months – the latest being the appointment of new head of regulatory relations Bari Jane Wolfe, who joins from Barcap, but spent 23 years in the compliance department at Lehman Brothers (and hence probably has her own experiences of dealing with the veritable reference data nightmare involved in managing regulatory risk and reporting). No doubt, Wolfe will be eagerly focused in the coming months on keeping the firm in tune with the regulatory community’s whims.

Swift may also be planning a session at this year’s Sibos about its potential in the securities reference data space, but it appears clear to me that its cards are already on the table in this regard. As I noted in one of my earlier blogs, its future strategy in this space was likely to be predicated on its selection by the industry for key roles such as the LEI issuing body. Now that it has been selected, we can expect to hear much more about the extension of its growing data focused empire with DTCC within the 2015 strategy and beyond.

After all, the partnership that has grown up between the two parties, which initially focused on the corporate actions space via their XBRL efforts (see more on which here), seems to have extended much deeper into their respective strategic visions than first expected. The partners are also likely hoping their European and US flavours will sit well with a regulatory community that is dominated by political concerns and jurisdictional challenges (the furore around the extraterritoriality of Dodd Frank being one such example). By covering both bases, the partners are no doubt aiming to sidestep any nationalist concerns about the location of data infrastructure. We’ll see how that pans out once one or other of these new proposals have come to fruition.

An industry participant said to me last year that the facilitators of the regulatory community’s data ambitions would be granted a licence to print money, let’s see if the empire lives up to that promise…

For now, I’ll leave you with their new theme tune.

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