Reconciliation and dispute resolution goes live this month. Our read is that no one…I mean no one… is really ready for this deadline. The paperwork? Not done yet. The decision on how parties are going to reconcile with one another? Not even close.
Out the gate we have offerings from EFET, Tri-Optima and Trayport. Regis-TR has partnered with Tri-Optima as has DTCC. EFET is going at it on their own but will apparently not be ready for production until Jan. ICE Trade Vault seems to be heading toward their own reconciliation solution. Tri-Optima seems to be the only “ready” solution.
But, the big winner, as far as we can see, is still MANUAL RECONCILIATION. There is a group called the CIO Forum put together by Gazprom, Deutsche Bank and a bunch of other major traders. It’s probable that this group will be putting together a “standard template” so that when counter-parties trade excel spreadsheets or CSV files they are at least in a shared format.
The really good news is that reconciliation is only done on a handful of fields. It is not gigantic.
BUT HERE’S THE REALLY BAD NEWS
One of the fields requires counter-parties to reconcile on “Underlying Instruments.” Here’s the thing: If you’ve been around the business you know that every trading system describes products differently. Dated Brent? I’ve personally seen it described 2 dozen ways in ETRM systems. Multiply this by all the EMIR products and we have a problem on our hands. The big question is how each of these vendors is going to handle the transformation. This is the major fly in the ointment for reconciliation. At the end of the day…no matter whether one chooses manual or a vendor solution… this is the hole into which people will be pouring time.
This is where I would shamelessly plug K3’s mapping functions. But that’s a much deeper discussion.