SEFs Are Only One Part of the Swaps Equation

After all, it's not just the execution that's designed to reduce systemic risk. Central clearing plays an integral role. FIX plays an integral role. Market surveillance is critical, and value-added tools will hopefully provide some differentiation to the smaller SEFs, at a time when the larger players are starting to widen the gap. Market utilities, too, are becoming important, such as the pre-trade credit hubs operated by Traiana and MarkitSERV, who are going at each other hammer and tong for market share (part of which seems to be kindly reminders to reporters when there's a press release that they, too, operate a similar solution).

The data angle, though, is one that's not covered as much but is clearly on the mind of every participant. A huge aspect of the National Futures Association regulatory agreements, for instance, is getting data into a schema they can process before oversight begins. Others are cognizant of the sheer amount of information that will be streaming through to swap data repositories (SDRs), and the variety of formats that it'll take.

"The data sets reported are large and the reporting is frequent. The language is very rich and hence even with consistent enumeration of values, the values can occur in different levels of the schema," says one spokesperson at the Depository Trust and Clearing Corporation (DTCC). "There are also differences in data structures between SDRs which is apparent through the public data available. Convergence towards consistent reporting standards is therefore a key priority for the industry to enable and improve the analysis of the reported data."

Gathering Steam
The standardization question gains momentum, though, with its visibility. Even an operator such as Bloomberg, which runs its own SDR alongside a SEF offering, is aware that industry moves towards creating common standards are crucial for an effective and efficient operating environment.

"It is an important matter," says Ben Macdonald, head of product at Bloomberg. "We regularly communicate with clients and market participants about consistent reporting standards, and will continue to support these efforts as the industry drives towards standardization. The data sets for SDRs are generally well prescribed, which will help support consistent data standards."

There are also differences in data structures between SDRs which is apparent through the public data available. Convergence towards consistent reporting standards is therefore a key priority for the industry to enable and improve the analysis of the reported data.

It's these ancillary effects, and the slight attention they receive compared to the Polaroid parts of regulation, that have the tendency to cause the most disruption. Not just for participants, either, but for the regulators themselves, who are struggling with data as it is.