Swift Dialogue

European trade repository REGIS-TR, created by Clearstream and Iberclear, has teamed up with SWIFT to help their customers in preparing for future derivatives regulatory framework in Europe.

With the European Parliament having passed legislation and European Securities and Markets Authority (ESMA) now drafting rules to reform OTC derivatives markets, financial market participants will soon need to clear OTC derivatives contracts through a central clearing counterparty and report them to trade repositories.

As new regulations, processes and market infrastructures begin to take shape, the European trade repository REGIS-TR created by Clearstream and Iberclear – the central securities depositories owned by Deutsche Boerse Group and BME, the Spanish securities market operator respectively – has teamed up with SWIFT to support their customers in preparing for future derivatives regulatory framework in Europe. Under the agreement, market participants will be able to access the derivatives trade repository and report directly to it using SWIFT. This connectivity enhancement will help customers to improve efficiency and security in transactions and also facilitate compliance with the upcoming European markets infrastructure regulation (EMIR). The legislation follows agreement by the Group of 20 major global economies to introduce mandatory central clearing and reporting of OTC transactions in September 2009 as a response to the financial crisis and fall of Lehman Brothers, a leading player in the OTC derivatives market, in 2008. Similar legislation, under the Dodd-Frank Act, comes into place in the US at the end of 2012.

REGIS-TR rolled out its FX trade reporting service in November 2011 to help customers to report their trades in compliance with EMIR, due to be enforced in 2013. It provides access and reporting interfaces to its customers through a web-based application and automatic and fully electronic communication in XML-formatted files. The SWIFT messaging capability will have particular importance to customers registering trades in foreign exchange derivatives as SWIFT accounts for high percentage of FX and commodities trades being confirmed electronically. 

 Jesús Benito, managing director of REGIS-TR, said the enhanced capability delivered by the inclusion of SWIFT messaging was an important benefit requested by REGIS-TR and SWIFT clients. "Much of the post-trade communication and electronic confirmation of FX and commodities derivatives happens through SWIFT network. What we are trying to do through our work with trade repositories is to enable our customers to more easily meet their regulatory obligations by also reporting via SWIFT, says Joe Halberstadt, head of FX and derivatives markets at SWIFT.

While SWIFT has large presence in the FX and commodities market, REGIS-TR intends to act as a trade repository for OTC derivatives transactions across asset classes. SWIFT plans to connect its services to other trade repositories in Europe and beyond. Both the Depository Trust and Clearing Corporation (DTCC) and the InterContinental Exchange (ICE) are offering swap data repository services in the US and are expected to provide similar services in Europe.

Regarding the awareness of compliance requirements among market participants, Halberstadt says more is needed. “Awareness is not as broad as it should be. There is a need for more outreach in the wake of Dodd Frank and with EMIR taking shape at great speed. Firms need to start thinking now to identify the right way to comply with these regulations”, he adds.