I’m not surprised that multiple firms are competing to be the swap data repository of choice. This is America after all, so if an opportunity exists (especially one created by government mandate) than several firms will go after it. However, I’m not sure I get the business model for running an SDR. Having control over swaps market data is certainly an asset to whichever firm has it, but as most of this data will be made public I’m not sure how valuable that asset ultimately is.
But while the repositories will certainly bring more visibility to the market, their impact on the earnings of the companies that offer them may be smaller. Kevin McPartland, a principal and director of fixed income research at TABB Group, told SNL it is still unclear how profitable providing reporting services would be. He said ICE could look to build out an analytics business on top of the swap data repository as another function in an end-to-end credit clearing business. Another potential business model could be in compiling data from different reporting organizations. “If we end up with multiple [reporting organizations] per region as could be the case, then it seems there could be a business of consolidating SDR data to get a full picture of the market,” he said.
Analytics on top of the data are one possibility. The other driver to run an SDR is not about direct revenue, but instead control. ICE probably figures why should I report my data to DTCC when I can just report it to myself?