XSP Readies App for DTCC’s Reengineered Services
Daniel Retzer, CTO, SunGard’s XSP
Corporate actions processing provider XSP is working on “another product purely focused on the capture and display of ISO 20022 messages from the DTCC,” says Daniel E. Retzer, chief technology officer (CTO), managing director for SunGard’s XSP.The product, likely to come later this year, is intended to help firms adapt to the reengineering of corporate actions services from the DTCC.
Using the same framework that spawned the software-as-a-service (Saas) offering XSPrisa, XSP is working with a joint SunGard/XSP client that is also a DTCC participant, Retzer says. The vendor is testing live messages via XSP’s conversion offerings and bringing ISO 20022-based message into applications. This will allow end-users to take the standardized messages, view them, respond to them and post their elections back to the DTCC.
“It will be XSP running in the background but it’s a new product similar to the way XSPrisa is a new product built upon core XSP technology,” Retzer says. The new offering will be run via a cloud computing infrastructure and will be available “more than likely on a standard software as a service type of license.”
The biggest demand for this offering will come from mid-cap firms that would prefer not to invest in an XML transformation infrastructure and may not have internal staff with the skill sets to do so, Retzer says. In addition, there is a shared pool of customers between SunGard and XSP that are also DTCC participants. Many of them have SunGard back-end offerings and XSP products and services for corporate actions processing.
The synergies among these offerings may enable firms to create new levels of integration with SunGard products to make postings to back-office accounting systems. In addition, SunGard has a direct gateway to the DTCC and XSP supports links to DTCC’s Smart Network and Swift.
“We’re building the interface with a client. We view the entire pool of DTCC participants—850 firms—as the addressable market,” Retzer says. “The fundamental issue for [mid-cap clients] is that they don’t have the capabilities to do the mapping and to carry the mapping to all of their legacy, internal systems.” Mapping is an XSP specialty, he adds.
SunGard and XSP have cloud computing infrastructures and they still have to decide which cloud will support the new app for the DTCC reengineering offering, Retzer says. “That hasn’t been determined yet. But the reality is that it will live in the cloud to facilitate all the things that we’ve been offering.” XSP is hoping that the new app will have an appeal based upon a browser based interface, low acquisition and operational costs, shared infrastructure and hosting support, and ease of upgrades, he says.
XSP will not be deploying the new application in the established clouds of customers, Retzer says. He says he acknowledges that many clients have already done the due diligence to find a cloud computing provider. “But we’re still not going to put the application there because that sort of defeats the purpose of having it installed in the cloud environment, which is the single place to manage the application, the product, data flow and the security,” he says. “The minute you start putting multiple clouds together in the framework is the minute you start opening yourself for operational management overhead.”
The DTCC’s corporate actions reengineering project will be implemented in phases this year and next with the goal of retiring all legacy systems on or before 2015, say DTCC officials. The multi-year reengineering project will lead to upgrades and replacements of 60 legacy systems that currently support the corporate actions services of the DTCC.
XSP is still working out the availability of its new offering but it’s likely to follow the DTCC’s time-line for ISO20022-based inbound and outbound messages, Retzer says.
Big Data ‘Nightmare’ Confounds CFTC
Scott D. O’Malia, CFTC commissioner & chairman of the regulator’s technology advisory committee
Scott D. O’Malia, a CFTC commissioner and chairman of the regulator’s technology advisory committee, says that the data submitted to swap data repositories (SDRs) is not “usable in its current form.” O’Malia made his comments as the keynote speaker at Sifma’s Compliance and Legal Society Annual Seminar on March 19.
Citing Big Data as the culprit, the commissioner says that it has stymied a key policy reform of Dodd-Frank—the mandatory reporting of over-the-counter (OTC) interest rate and credit index swap trades to an SDR.
“The goal of data reporting is to provide the commission with the ability to look into the market and identify large swap positions that could have a destabilizing effect on our markets,” O’Malia says. “Since the beginning of 2013, certain market participants have been required to report their trades to an SDR.
“Unfortunately, I must report that the commission’s progress in understanding and utilizing the data in its current form and with its current technology is not going well,” O’Malia says. “Specifically, the data submitted to SDRs and, in turn, to the commission is not usable in its current form. The problem is so bad that staff have indicated that they currently cannot find the London Whale in the current data files. Why is that?”
The commissioner says that in the rush to ready reporting rules regulators failed to specify the data format for reporting that firms must use when sending their derivatives to SDRs. “In other words, the Commission told the industry what information to report, but didn’t specify which language to use. This has become a serious problem. As it turned out, each reporting party has its own internal nomenclature that is used to compile its swap data,” O’Malia says.
The proprietary data formats are resulting in data “being recorded inconsistently from one dealer to another.” More than 70 reporting swap dealers are using 70+ different data formats. “Now multiply that number by the number of different fields the rules require market participants to report. To make matters worse, that’s just the swap dealers; the same thing is going to happen when the commission has major swap participants and end-users reporting. The permutations of data language are staggering. Doesn’t that sound like a reporting nightmare?”
O’Malia urges the commission to: receive more uniform data; and “significantly” upgrade its IT capability to handle data on thousands of swaps per day. So far, the regulator’s computer programs have loaded this data without crashing, he says. This may be due to the fact that many of the data fields the CFTC currently receives are “not even populated.”
Resolving this “data dilemma” has to be the CFTC’s priority and it must focus on doing more to protect the data collected and to develop a strategy to better understand the information being gathered, O’Malia says. “Until such time, nobody should be under the illusion that promulgation of the reporting rules will enhance the commission’s surveillance capabilities. As chairman of the Technology Advisory Committee, I am more than willing to leverage the expertise of this group to assist in any way I can.”
In related news, the CFTC announced the procedures to be used by swap dealers (SDs) and major swap participants (MSPs) for submitting risk exposure reports and chief compliance officer annual reports via:
CFTC regulation 3.3(f), which requires each SD and MSP to file electronically a copy of the annual report of the SD’s or MSP’s chief compliance officer not more than 90 days after the end of the fiscal year of the SD or MSP;And commission regulation 23.600(c)(2)(ii), which requires that each SD and MSP furnish copies of its risk exposure reports to the CFTC within five business days of providing such reports to its senior management.
Firms can comply with these regulations through the CFTC website at: https://forms.cftc.gov/fp/SDAndMSPReport.aspx. Reports should be filed in a PDF format.
The commission’s division of market oversight (DMO) and office of data and technology (ODT) also issued an advisory reminding swap counterparties of the April 10, 2013 deadline for each counterparty to obtain a legal entity identifier (LEI), known as a CFTC Interim Compliant Identifier or CICI.
Fenergo Updates Client Software to Meet FATCA Requirements
Client software vendor Fenergo has launched an enhanced version of its Client & Counterparty Data Management solution to support compliance and customer onboarding teams to help them comply with forthcoming regulations such as FATCA, Dodd-Frank, European Market Infrastructure Regulation (EMIR) and MiFID II, officials say.
The new regulations will require higher levels of compliance and requirements to identify and classify data. The solution also offers more business intelligence features to help financial institutions increase revenue via upselling and cross-selling opportunities via onboarding processes, officials say.
The enhanced solution provides real-time solutions around legal entity data consolidation and cleansing such as data mapping, standardization, augmentation, de-duplication and remediation. The solution serves as a single source of data for all legal entities.
Cyber Innovation and NEC Take On Big Data
Infrastructure-as-a-service provider Cyber Innovation Labs and NEC Corp. of America (NEC) have launched a scalable private cloud offering, the Cloud in a Vault (CiaV) to provide support for managing the massive data sets of Big Data, officials say. CiaV combines NEC’s Nblock integrated IT infrastructure with security, compliance and monitoring in a hosted environment.
Financial services firms can apply CiaV’s infrastructure support only when they need it, thus controlling monthly operational expenses, officials say. Firms can also use the cloud offering to process, deliver and archive Big Data sets on-demand.
MarkitSERV Debuts Credit Checking for OTC
Trade processing services vendor MarkitSERV has launched a pre-trade credit checking solution for over-the-counter (OTC) derivatives, MarkitSERV Credit Centre, that attempts to ease clearing for trades executed in electronic marketplaces such as swap execution facilities (SEFs).
MarkitSERV Credit Centre targets buy-side firms, regional banks and other institutions that use futures commission merchants (FCMs) for clearing; FCMs provide a consolidated view of available credit. The new offering can help institutions deploy their credit lines among multiple clearing venues.
Credit Centre is backed by a ultra-low-latency system, TRADExpress from Cinnober Financial Technologies, officials say. The first phase of Credit Centre is complete and onboarding for buy-side firms and FCMs is already underway.
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