December 14, 2011

LSE in talks with UK regulators to create an OTC Trade Repository

Story from eFinNews here: (subscription required)

Summary: The London Stock Exchange is in talks with UK regulators about the possibility of setting up a trade repository for over-the-counter derivatives, Financial News has learned, in the latest sign of the group’s plans to diversify its revenues and benefit from new rules being formulated in reaction to the 2008 crisis.

My thoughts: How does this idea fit with the current DTCC position? Even if they build it – on what basis are firms mandated to use it? Why bother? It seems odd that the ISDA selection process for a provider of Repositories, doesn’t seem to have stuck in the minds of other firms like LSE, ICE and CME.

Update / comment from Ryan Baccus, VP at Sapient:

I think CCPs such as ICE and CME will pursue [this opportunity] as they feel that they will hold a vast amount of the trade info (assuming upwards of 60% trades get cleared) and will try to make some revenue from that given that they will have to hold the data anyway.

LSE already operate an Approved Reporting Mechanism (ARM) which is the reporting mechanism required for FSA transaction reporting under MiFID so is a natural progression for them to look to extend this service especially with the [potential] acquisition of LCH


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