The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced the availability of a beta version of its FRTB Real Price Observations Data Service. The service will enable the mapping of risk factors to a pool of global derivatives data to gain insight on modellability results in accordance with the Fundamental Review of the Trading Book (FRTB) framework. DTCC developed the FRTB service in collaboration with over 30 pilot members, including every leading bank that trades over-the-counter (OTC) derivatives around the world.  

FRTB, released by the Basel Committee on Banking Supervision (BCBS), updates the minimum capital requirements for market risk to address shortcomings of the current Basel III market risk capital framework. FRTB requires banks to evidence enough market liquidity for the positions in their trading book that are capitalized using an approved internal model approach (IMA). Without empirical trade data and tools to interact with it, banks are struggling to understand the impact on capital charges and the quantitative benefits of IMA. Failure to secure robust, high quality price observation data to assist with non-modellable risk factor (NMRF) analysis may subject firms to significant capital inefficiencies, which could threaten the viability of trading in certain asset classes and the withdrawal of liquidity from the market.

DTCC is uniquely-positioned to assist the industry with its FRTB data needs for OTC derivatives and cash instruments to test modellability of illiquid instrument classes. The release of DTCC’s FRTB beta application represents the first phase in the firm’s efforts to deliver a pooled data solution that will help banks obtain greater insight into modellability results and build the business case for IMA.

“We are excited to launch the beta version of our new FRTB data service in order to deliver the data and tools banks need to adequately measure modellability and capital impacts. Our service leverages DTCC’s global data collection infrastructures to pool observable transaction data, helping banks meet requirements for internal model approval, thereby maximizing risk capital charge efficiencies,” said Tim Lind, Managing Director, Head of DTCC Data Services.

To deliver the service, DTCC partnered with ActiveViam’s flagship in-memory analytics technology, ActivePivot, in order to provide full insights on the impact FRTB will have on market risk capital charges. ActiveViam is a leading provider of data analytics software solutions designed to meet the significant speed and data volume demands of financial service applications. The DTCC FRTB service pilot will continue until Q2 2020.

“We are delighted DTCC chose to partner with us and we look forward to bringing this project to life,” said Kathy Perrotte, Co-Founder and Managing Director, ActiveViam. “This service will help banks move beyond uncertainty and conjecture related to IMA and position them to achieve the actual insight necessary to make strategic plans to address the challenges created by the FRTB framework.”

Mr. Lind added, “We were committed to finding the best consulting and technology partners to deliver our solution and selected ActiveViam because of its reputation in the industry, experience with FRTB and speed to market.”