ISITC US' Snitzer: Swaps Workflow 2012 Priority
Creating standardized workflow and messages related to the processing of swap transactions will top the list of initiatives for ISITC's U.S. arm which just appointed Jan Ellis Snitzer, as its new chairman for a two-year term .
Snitzer replaces Gary Probert, managing director of Citi. Snitzer, who is also vice president of straight-through processing initiatives at Boston-based fund manager Loomis Sayles & Company, had been first vice chair of the organization of middle and back office operations executives for the past two years.
"ISITC is anticipating that fund managers and custodian banks will have plenty to do to implement final rules imposed by the Dodd-Frank Wall Street Reform Act," says Snitzer whose role at Loomis Sayles is to ensure efficient communications with broker-dealers and custodian banks. "Critical to compliance will be correctly managin and monitoring the trade lifecycle of a swap transaction."
That goal falls in line with ISITC's efforts to expand the participation of broker-dealers in the trade association, whose derivatives working group will lead the charge in helping members comply with the new legislation. That group includes representatives from AQR Capital Management; BlackRock; Bank of New York Mellon; Franklin Templeton Investments; State Street Corp. and the Society for Worldwide Interbank Financial Telecommunications. As of late 2011, broker-dealers comprise only 10 percent of ISITC U.S.' members. About 35 percent are representatives from fund management shops and 16 percent are from custodian banks. Officials from financial software firms make up 39 percent of the members.
"In 2012, ISITIC's derivatives working group will start a series of special interest discussions to look at the impact of the new regulations for central clearing on the lifecycle of over-the-counter derivatives and develop best practices [for post-trade communications among fund managers, broker-dealers and custodian banks]," Snitzer tells ISS' online edition. "The initiative will be open to any industry participant and is similar to the approach ISITC took in 2011 when it completed a document about best practices for matching transactions."
The U.S. Dodd-Frank Wall Street Reform Act mandates that so-called standardized swap contracts are traded on registered swap execution facilities, cleared through clearinghouses and reported to trade repositories. Complying with final rules established by the Securities and Exchange Commission and Commodity Futures Trading Commission for the $700 trillion market, explains Snitzer, will require accurate trade confirmation, affirmation, collateral management, payments, reporting and settlement. Fund managers, broker dealers and custodian banks will need to rely on standardized electronic workflow and messages to validate trade instructions and correctly move collateral, make periodic payments and reconcile cash flows before the settlement date of the swaps deal.
ISITC's U.S. arm has already done some work in the swaps arena. In 2010, the derivatives working group generated the workflow and message formats for fund managers to inform their prime brokers, custodian banks and accounting agents on the status of executed tranactions. That information also includes the details of amended trades, novated transactions and partial or complete termination of deals. A full copy of tbe documentation is available to ISITC's registered members on the organization's website www.isitc.org.
While ISITC has historically promoted the use of ISO-endorsed messages, in the case of swap transactions it will be endorsing FpML formats promoted by the International Swaps and Derivatives Association, the trade group for the swaps market.
Written by Chris Kentouris, Editor-in-chief (Chris can be reached at Chris.Kentouris@hotmail.com).
