Post-trade derivatives processing firm truePTS has joined forces with LEI Smart, a provider of legal entity identifier matching and validation services, to offer an integrated counterparty management platform for dealers and buyside clients.
Through truePTS Counterparty Manager, the firms aim to reduce trade breakage by addressing poor quality counterparty data that is hampering the ability of swaps participants to report accurate data to trade repositories in compliance with sweeping derivatives reforms stemming from G20 agreements.
“At different stages of the lifecycle, a trade needs to get populated with new data and the most important is counterparty data. If you don’t know who the counterparty is you can’t report the trade,” said Zohar Hod, CEO of truePTS.
“As a processing provider, it’s really important to get the minimum number of trade breaks. The more information we can validate, the better the matching of trades and greater the ability to report them accurately.”
The latest initiative could help truePTS in its quest to win market share from incumbent OTC post-trade provider, MarkitSERV. Initially offering matching, confirmation, allocation and regulatory reporting services for swaps traded on the trueEX swap execution facility, the post-trade provider has since been spun out of the SEF operator and is now platform-agnostic.
Built with the benefit of regulatory hindsight, truePTS provides links to multiple trade repositories through a single connection, mitigating reporting differences across jurisdictions.
The firm is hoping that the latest “next-generation” service will help to drive business to its platform as swaps counterparties seek operational efficiencies in the costly world of regulatory reporting. Industry estimates suggest that reporting swaps to a trade repository can cost up to US$5m per product and jurisdiction, including fees and integration costs.
“The LEI data offering is a big value-add for our customers as it offers them a cheaper, more agile and complete service,” said Hod.
TruePTS has been using LEI Smart for its own mapping and validation purposes to address widespread counterparty data quality issues, particularly when bringing new clients on board. A single hedge fund, for example, could have hundreds of LEIs and some buyside firms use multiple risk management systems, requiring swaps to be booked in multiple systems with identifiers in different formats.
Errors in counterparty data are common, and it is little surprise. Legal entity identifiers are mandated via 57 separate regulations globally and more than 460,000 of the 20-figure codes have been registered so far. That figure could treble by 2020 following the implementation of MiFID II, according to industry estimates.
LEI information is available across open databases but LEI Smart aggregates the data and provides services for clients to monitor their own legal entities, enable mapping and validation of counterparty LEIs, fix incorrect LEI usage and automatically update changes.
“The ability to receive alerts on changes to relevant LEI data is unique and this is a great way to package our service into a larger offering as it makes it easier for clients to adopt,” said Ben Lis, founder of LEI Smart.
“Some of the large asset managers are creating new LEIs every week and they might regularly change information such as fund names or ownership, so you need to manage that information in an automated way.”
The tie-up also provides messaging capabilities, enabling LEI data to be shared between counterparties and infrastructure providers such as trading platforms, CCPs and trade repositories.
Earlier this year, truePTS struck an agreement with CME Group to integrate post-trade applications into the exchange’s network of trade repositories in an attempt to reduce costs for clients that were previously required to connect separately to trade repositories operating across the globe.