MarkitSERV Launches Cross-Currency Swap Automation
IHS Markit, a world leader in critical information, analytics and solutions, today announced new trade technology solutions from MarkitSERV that enable full automation of settlement and margin payments in the cross-currency swaps market, helping firms to reduce financial and operational risk throughout the trade lifecycle.
Cross-currency swaps expose counterparties to settlement risk due to the high value of initial and final principal exchanges that take place in this $30 trillion market. New automation, workflow and integrations between MarkitSERV and both CLS and LCH SwapAgent enable firms to automate swaps payments, including initial and final notional exchange settlements through CLS and variation margin payments with LCH Swap Agent.
“MarkitSERV and our partners now deliver true, end-to-end passive asset servicing for settlement and margin processes to the cross-currency swaps markets,” said Claire Lobo, head of business development at MarkitSERV. “These advances demonstrate how the network, workflow and integrations provided by MarkitSERV remove the need for human intervention in post-trade processes, helping firms improve efficiency and reduce risks.”
At the beginning and end of trades, new auto-fixing functionality from MarkitSERV automatically applies foreign exchange rates for initial and final notional amounts for cross-currency swaps and basis swaps settled in CLS. This enhances existing integration with CLS which streamlines the settlement process and mitigates settlement risk for cross-currency swaps by linking CLS’s payment-versus-payment (PvP) settlement service to MarkitSERV’s trade confirmation service.
“CLS is committed to mitigating systemic risk in the global FX and OTC derivatives market, and we are continuously looking at new ways to improve our services,” said Alan Marquard, chief strategy and development officer at CLS. “End-to-end automation with MarkitSERV’s trade confirmation service will further reduce settlement risk and improve efficiency for participants trading cross-currency swaps.”
During the life of the trade, new connectivity from MarkitSERV to LCH SwapAgent delivers interest rate swaps trade data to SwapAgent, which acts as the central calculation agent for variation margin and settles cash and collateral exchanges. MarkitSERV and LCH will extend this functionality to the cross-currency swaps market when those instruments go live at LCH SwapAgent later this year.
“Connecting to MarkitSERV will offer our members a way of accessing our cross-currency swaps service, when it goes live later this year,” said Nathan Ondyak, global head of LCH SwapAgent. “LCH SwapAgent has been launched with significant support from the market, and in that spirit it was important that we engage with MarkitSERV as the trade processing platform of choice for many firms.”
Source: IHS Markit
New investors are LVC and IHS Markit.
Transactions from services like compression should be exempt from clearing obligation.
Clearing of FX options is due in the coming months.
The service has compressed over $6 trillion notional to date.
GCSA Capital helped the clearinghouse develop its performance bond.