DTCCs data repository for credit default swaps has allowed regulators increased access to counterparty information. Previously DTCC’s Trade Information Warehouse held back specific counterparty information when pressed by regulators if the counterparty in question failed to give its consent.
Credit default swaps first hit the front pages during the collapse of the subprime mortgage industry in 2007 when CDS were sold with abandon by AIG without concern for the underlying risk. CDS were also re-packaged into synthetic collateralised debt obligations in order to continue the pre-2007 boom in subprime lending.
The derivative has remained in the spotlight during the Greek debt crisis as regulators have been busy uncovering the role of banks such as Goldman Sachs and Deutsche Bank had in hiding the extent of Greek debt.
Regulators from both the EU and the SEC are keen to discover if the same banks also took out CDS on Greek debt.
The DTCC Warehouse provides registry of the details of the majority of outstanding credit default swaps traded globally, and has consistently stated that it is eager to cooperate with regulators concerning access to CDS data.
A response in November 2009 from the DTCC concerning the Committee of European Securities Regulators consultation paper on the role of a depository stated: For regulatory reporting, the necessary levels of oversight, access to data, and confidentiality should be achieved through global co-operation by regulators from all continents and by appropriate reciprocity arrangements to guarantee access to data… Repositories should be designed to meet the needs of all regulators, both prudential and markets, with a legitimate interest in the data contained therein.
However, according to an article in the Financial Times, the DTCC had resisted supplying the relevant data to regulators concerning Greek CDS.
According to a recent press release from the DTCC: It is a bedrock principle of the Warehouse that all interested regulators should have unfettered access to Warehouse information necessary in furtherance of their respective regulatory missions… In light of recent developments, we believe that responding to these requests while continuing to observe the practice of not providing counterparty names absent consent may no longer be appropriate.
CDS data disclosure is not a new topic for DTCC. In 2008 after the collapse of Lehman Brothers, DTCC felt it necessary to release information on the size of the CDS market and CDS contracts written on Lehman Brothers to address misconceptions about credit derivatives.
DTCC is controlled by a board of members including J.P. Morgan and Goldman Sachs, and a number of banks, broker/dealers and mutual funds.