CFTC Picks DTCC, SWIFT to Issue Swap Participant ID Codes
July 24, 2012
The Commodity Futures Trading Commission Tuesday said it picked the alliance of the Depository Trust and Clearing Corporation and the Society for Worldwide Financial Telecommunication to register and maintain a system of identifiying all parties to swaps transactions that it must supervise.
This is the first designation of a registration authority in what ultimately expected to be a worldwide system of creating legal entity identifiers.
In the CFTC case, the two parties will issue what currently are known as CFTC Interim Compliant Identifiers or CICIs. These will adhere to standards set by the International Organization for Standardization, until a global system based on those standards is set up.
The Financial Stability Board earlier this summer recommended to the leaders of the G-20 industrial nations a three-tier hierarchy of an oversight council, local registration authorities and a central operating body to issue the codes and establish a computationally logical means of maintaining a worldwide database of the registered numbers.
In the CFTC case, the codes will be used in the aggregation of data on derivatives trades. The use of credit default swaps were a central cause of the credit crisis of 2008 and the 2010 Dodd-Frank Wall Street Reform act mandated that a system of standardized swaps traded through electronic execution facilities be supervised by the CFTC.
The CFTC is also participating in the international process and expects the interim identifier “will transition into the global LEI.”
Today’s Order, issued pursuant to Part 45 of the Commission’s regulations, includes findings of fact by the Commission that the CICI provided by DTCC-SWIFT is the only available identifier that satisfies all requirements of the Commission’s swap data reporting rules, and can be provided to market participants sufficiently in advance of the initial compliance date for swap data reporting to enable compliance with the rules.
At least three other organization or groups have been pursuing the designation by the CFTC, including New York’s Financial Intergroup. Financial Intergroup has been a champion of a “federalized” system of registration, around the world, while the DTCC, SWIFT, the Global Financial Markets Association and the Securities Industry and Financial Markets Association have promoted a centralized approach.
GFMA said Tuesday, however:
“As laid out in our 2011 recommendation to regulators, GFMA believes that a federated LEI system with a strong central utility to ensure data quality is the best path forward. GFMA has recommended that DTCC and SWIFT serve as this central utility and partner with the Association of National Numbering Agencies (ANNA)and its network of local national numbering agencies (NNA’s) to register, validate, and maintain LEIs in the NNA’s home markets. This partnership will ensure the highest quality data is available in the LEI database.’’
