Bloomberg News

DTCC’s Faryniarz Warns of Move From U.S. on Dodd-Frank Concern

October 25, 2011

Oct. 25 (Bloomberg) -- The Depository Trust & Clearing Corporation may move its data outside the U.S. should an American law spur companies in other countries to stop sending it information on trades, an executive said.

The U.S. Dodd-Frank Act, passed in 2010, requires foreign market overseers to compensate U.S.-based trade repositories for legal expenses when shared information becomes public. That will fragment oversight because foreign regulators won’t be willing to pay and may require firms that trade derivatives to report to local entities instead of a global one, Dan Faryniarz, managing director of derivatives market structure and industry relations at DTCC, said in Hong Kong today.

The DTCC, the biggest trade repository for over-the-counter derivatives, collects details on trades, such as their size and the identities of the counterparties, for use by regulators. Forcing overseas authorities to compensate the DTCC for lawsuits that may arise if its data are released will hinder the free flow of information, Faryniarz said during a panel at an International Swaps and Derivatives Association conference.

“A trade repository will just be bits and bytes if it doesn’t have all of the information,” he said. “We will need to look at the idea of moving our global dataset offshore.”

Regulators worldwide are increasing scrutiny of over-the- counter derivatives after their relative opacity was blamed for masking systemic risk before the 2008 collapse of Lehman Brothers Holdings Inc. The market reached $601 trillion last year, according to Bank for International Settlements data.

The DTCC houses a trade repository for credit-default and equity swaps. In May, it won a global contract from ISDA to collect trade information on interest-rate swaps, which make up the largest portion of the OTC derivatives market. All global derivatives dealers and more than 2,100 asset-management firms in 71 countries are linked to the depository, according to DTCC.

--With assistance from Nina Mehta and Matthew Leising in New York. Editor: Joanna Ossinger

To contact the reporter on this story: Eleni Himaras in Hong Kong at ehimaras@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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