Markit Bolsters Trade Settlement for Bank Loans

Terry Flanagan

Markit has added new functionality in its electronic trade settlement service for syndicated loans that makes it easier and faster for users to manage a time-consuming step affecting the settlement of 31% of trades. The system streamlines the trade settlement process further, helping the loan market operate more efficiently.

The new functionality enables buyers and sellers to use Markit’s ClearPar online system in order to answer questions that affect variable clauses within an assignment agreement (A&A), a document required for transferring ownership of loan assets. Known in the industry as A&A questions, these are required by 31% of loan trades – up from 9.5% in 2009, according to estimates by Markit.

ClearPar automatically updates the assignment agreement based on the answers to A&A questions provided by parties to the trade.

“A&A questions weren’t an issue just a couple of years ago, but have more recently started to introduce additional steps and delays into the settlement process due to the lack of a technology solution to incorporate them into the process,” said Mindy Campbell, bank debt operations manager at T. Rowe Price. “Markit has helped to address this issue, allowing us to more easily manage the questions directly in ClearPar for incorporation into the A&A.”

Until recently, A&A questions were the exception in the loan market, but now they present a frequent and real challenge to the market.

“Working with our customers, we identified this as an issue and together we designed a solution,” said Scott Kostyra, managing director and head of loan trade settlement at Markit. “Through ongoing collaboration with buyside and sellside institutions, we continue to enhance our services in order to help firms operate efficiently in the loan market.”

Pierre Batrouni, chief financial officer & head of operations at MJX Asset Management, noted: “Upgrading how ClearPar handles A&A questions (pop-ups) is an important advance by Markit because it provides buyers and sellers with the ability to handle the process without any third party intervention. The system assigns and displays these questions in such a way that users can view all of them simultaneously while tracking their responses for multiple entities. In addition, the system proactively notifies users of pop-up questions requiring completion.”

In 2012, ClearPar settled over 360,000 allocations, and in 2013, ClearPar is on pace to settle over 400,000 allocations, according to a company presentation.

In March 2013, ClearPar settled over 40,000 allocations, the highest monthly volume in platform history.

Markit has new products in the pipeline for Custodian Services, such as Document Delivery, which delivers trade documents originating from Markit Clear/Clearpar to
Custodians/Trustees/Admins as trade milestones are reached. Real-time availability can noticeably reduce processing delays, and systematic document delivery can significantly reduce buyside effort, the company said.

Another new Custodian Services product is Trade Messaging, which delivers trade messages originating from Markit Clear/Clearpar to Custodians/Trustees/Admins as trade activity occurs , thereby creating same view of trade for buyside users and their 3rd party service providers throughout trade lifecycle.

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