The CFTC’s push to provide identifiers for OTC trading takes a big step forward via the DTCC and SWIFT.
As expected, the DTCC and SWIFT have launched a Web-based utility as part of their recently designated roles as interim service providers for the CFTC Interim Compliant Identifiers (CICIs) for legal entities that participate in over-the-counter (OTC) derivatives trading.
The website www.ciciutility.org follows the CFTC’s plan to establish a CICI utility that issues identifiers to firms involved in OTC transactions. CICIs comply with a global standard for Legal Entity Identifiers (LEIs), known as ISO 17442, driven by the Financial Stability Board (FSB) and the G20. The Great Recession and its aftermath exposed the confusion and high risks for error caused by multiple ways of identifying a single entity.
The temporary CICIs are likely to become the LEIs that will be part of a global effort to launch standardized LEIs by March 2013.
Approximately 1.5 million legal entities that are counterparties to financial transactions in all asset classes globally are expected to receive LEIs, officials say. But CICIs target a much smaller group of legal entities working in OTC derivatives, estimated to be less than 50,000.
CFTC officials are specifying that the new identifier must be used by registered swap dealers and major swap market participants beginning on the effective date for the CFTC final swap reporting and recordkeeping rule, which is Oct. 12, 2012 for OTC derivatives transactions in credit default and interest rate swaps.
The new CICI utility will work in conjunction with the Association of National Numbering Agencies (ANNA) in registering and validating entities, officials say. The collaborative effort will foster a federated approach to the administration of the CICIs and the LEI standardization under the FSB’s framework. The FSB has also set up an LEI Private Sector Preparatory Group (PSPG), which had its first meeting on July 25.
The new website will make use of the the test files of the provisional LEIs provided to the industry in February 2012, officials say. The website utility will also exploit the full database of CICIs assigned to date, which includes 24,000 legal entities from more than 80 countries focused on OTC trading.
The website will allow legal entities to self-register and financial firms to register their counterparties. The portal will also provide support for:
- Searching the database
- Downloading the daily change files or full database, which is available immediately
- Registering entities for CICIs
- Certifying the reference data for legal entities assigned a CICI
- And challenges of reference data
Last month, Paul Janssens, LEI program director, securities and treasury markets for SWIFT, told
Paul Janssens,
LEI program director,
SWIFT
FTF News that the portal has been set up as a not-for-profit effort and will be run via a cost recovery model. “The global funding model for LEI will be defined under the Financial Stability Board (FSB) framework and the current plan for the CICI is to have an initial registration/certification fee of $200 and starting year two, a $100 maintenance fee,” Janssens says.
“We are continuing to work with regulators and the industry globally to provide a fully formed and practical solution to solve the LEI challenge,” says Janssens in a prepared statement about the utility launch. “This includes further work to evolve the solution to a federated data contribution and validation model over time.”
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