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Regulations on OTC Derivatives Could Boost Data Levels 400 Percent

Dodd-Frank regulations will result in firms generating much more data.

Changes stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act and other regulations will affect the over-the-counter derivatives markets in the United States and in Europe, and could push data levels 400 percent higher, according to Advanced Trading.

The Tabb Group recently issued findings from its research, which determined there will be much more OTC swap-generated data due to the new electronic trading, reporting and clearing standards.

"Things that were done in a batch overnight now need to be done intraday," Keven McPartland, head of Tabb's fixed income unit, explained to Advanced Trading. "So not only are they doing it faster, but they need to consume a considerable amount more data to make those same decisions and calculations."

Because of the data overflow that comes with new regulations, firms will need to address their technological infrastructure, according to the report. This issue is complicated by the fact that less than one-tenth of the Dodd-Frank rules explaining how it will work - 38 out of an expected 400 - had been written as of July 1, the source says.

The report goes on to say that companies involved in OTC derivatives trading will have to build automated environments and focus on making more robust messaging systems in order to facilitate the transactions that will happen rapidly across central clearing, etrading, reporting and risk management processes.