MarketAxess Facilitates Automated Repo Confirmation In US
MarketAxess Holdings Inc., the operator of a leading electronic trading platform for fixed-income securities, and the provider of market data and post-trade services for the global fixed-income markets, recently facilitated the first repurchase agreement (repo) trade affirmation between Citadel and J.P. Morgan.
"As #SFTR and #CSDR are raising the profile of risks associated with not having an efficient trade confirmation solution, more firms are now migrating to electronic solutions like ours" Camille McKelvey highlights the importance of #repo trade confirmation https://t.co/vL2Beh2y9l
— MarketAxess (@MarketAxess) November 25, 2019
With more than 30 years of experience in providing the technology to support electronic trade confirmation in Europe, this transaction between Citadel and J.P. Morgan marks the first automated confirmation through MarketAxess in the United States. MarketAxess’ trade confirmation engine provides the ability for buy- and sell-side clients to electronically confirm repo transactions on T+0 and throughout the complex transaction lifecycle.
Jamie Clayton, Head of European Operations, Citadel, said, “Automation of the repo trade confirmation process reduces risk and improves efficiency in this critical part of the Fixed Income market. Partnering with MarketAxess has delivered a proven solution to help modernize the post-trade process in Europe, and we look forward to it expanding across all repo markets.”
Dan Phillips, Operations Manager, J.P. Morgan, commented, “Solutions like MarketAxess’ trade confirmation engine are a useful tool in managing pre-settlement risk with a streamlined technology solution backed by a broad community of counterparties.”
Repo transactions are typically confirmed manually which can increase the risk of trade failures and ultimately cost. By offering a service that automates the confirmation process, the industry benefits from reduced risks and greater control over their post-execution processes. The growing global community of over 50 firms leveraging the repo trade confirmation service further reinforces the value of the offering. In October 2019, MarketAxess saw a 94% increase in the number of repo transactions confirmed, as compared with year-end 2018.
Camille McKelvey, Head of Business Development, MarketAxess post-trade solutions, said, “The repo market has historically experienced a long-standing lack of automation. As SFTR and CSDR are raising the profile of risks associated with not having an efficient trade confirmation solution, more firms are now migrating to electronic solutions like ours. Citadel and J.P. Morgan have led the way in the United States by extending their existing use of MarketAxess’ trade confirmation engine outside of Europe, and are ultimately supporting a growing global community.”
Trade confirmation services have further applications in supporting regulatory compliance with the impending Securities Financing Transaction Regulation (SFTR) and Central Securities Depository Regulation (CSDR). As the potential cost for reporting inaccuracies and settlement failures increases with these regulations, confirming transactions close to the point of execution through an automated solution is paramount to managing regulatory and settlement risk.
Central Securities Depositories Regulation is due to apply in February 2021.
Market participants need to mitigate the potential risks and costs of upcoming penalties and buy-ins.
The association has sent a letter to European Commission and ESMA on the lack of regulatory clarification.
CSDR is due to come into force in September 2020 and introduce penalties for trades that fail to settle.
Firms that fail to prepare should prepare for more trade fails, Meritsoft says.