Yesterday BofA Merrill Lynch, Barclays, J.P. Morgan and UBS — four of the largest clearing brokers — confirmed their support for the Clearing Connectivity Standard (CCS), a new over-the-counter (OTC) derivatives reporting standard.
CCS is an industry standard that is designed to improve OTC derivatives reporting and communication for asset managers, clearing brokers, custodians, and service providers, according to the press release.
The announcement on June 10 came on the second of the three Commodity Futures Trading Commission (CFTC) mandated clearing implementation dates for the industry in 2013. Under the Dodd Frank Act of 2010, the CFTC has mandated certain OTC derivative products be centrally cleared.
The new standard is targeted at clearing brokers, known as futures commission merchants or FCMs in the U.S., to transmit information about clearing OTC derivatives trades and margins to their asset manager clients, custodians and services providers.
According to Ray Khan, head of OTC Clearing at Barclays, the new standard will help simplify some processes and even work as a solution. “The CCS format will simplify and align margin and portfolio reconciliation process,” said Khan. “We’re pleased to join the core group of market participants in supporting and adopting this standard, as we see it as a solution that will help drive post trade efficiencies for out clients.”
[Industry Underprepared for OTC Derivatives Trading and Market Regulation]
CCS is supposed to reduce the overall cost and operational risk associated with managing in multiple disparate reporting formats.
Andres Choussy, Global Co head of OTC Clearing at J.P. Morgan is optimistic about the standard.
“As industry moves to implement mandatory clearing, the absence of formal standard for formatting and transmitting margin and position data was a significant hurdle to achieving efficient and cost effective connectivity between market participants,” said Choussy. “We are pleased that this industry collaboration has successfully produced this standard as this will facilitate operating in the new market environment.”