EU watchdog fines DTCC for derivatives repository failings

London

THE European Union's (EU) markets watchdog has fined the US DTCC Derivatives Repository Ltd 64,000 euros (S$97,920) for failing to give regulators speedy access to data on trades as required under the bloc's laws.

The fine is modest for a company the size of DTCC but will be embarrassing for one of the world's most important market infrastructure organisations which handles trillions of dollars of securities transactions each day.

During the 2007-09 financial crisis regulators were unable to see who was on both sides of a derivatives trade in order to assess risks of default. In a core response to the crisis, new laws require all trades to be reported to a repository that gives regulators access to all data in the US$550 trillion derivatives market.

The EU's European Securities and Markets Authority (ESMA) said on Thursday the fine was due to DTCC "negligently failing to put in place systems capable of providing regulators with direct and immediate access to derivatives trading data".

DTCC said that it continues to work closely with ESMA and regulators around the world to ensure timely submission of trade data, but could not comment further on matters addressed in 2014.

Six repositories have been authorised in the EU by ESMA, the sector's regulator, and DTCC is the largest.

It is the first time that ESMA has taken enforcement action against a repository.

DTCC failed to provide direct and immediate access to data for nine months from March 2014, when delays to access increased from two days to 62 days after trade reports were filed, affecting 2.6 billion reports, ESMA added.

Under its authorisation terms with ESMA, the repository had agreed it would give access on the first working day after the trade was reported.

DTCC had failed to put in place adequate data processing systems, failed to tell ESMA quickly that delays were occurring, and it took three months to establish effective remedial action even while delays were worsening, ESMA said. REUTERS