Post-Trade Services Build Linkages

Terry Flanagan

Post-trade middleware providers play a critical role in taking risk out of financial transactions by automating services such as confirmations and affirmations, thereby fulfilling regulatory mandates as well as

MarkitSERV, a widely used electronic trade processing service for over-the-counter (OTC) derivative transactions, is to be the first middleware provider to deliver foreign exchange (FX) trades for clearing to Nasdaq OMX.

Providing clearing connectivity to Nasdaq OMX expands MarkitSERV’s ability to serve the global FX industry’s growing need to connect to multiple clearinghouses (CCPs) and trade reporting facilities. MarkitSERV connected to Nasdaq OMX for clearing interest rate swaps in 2012.

To date, MarkitSERV has processed approximately 100,000 FX non-deliverable forward (NDF) submissions and its gateway has been used for the vast majority of the $1+ trillion in notional value of cleared NDF trades.

“As a consequence of recent regulation, the FX landscape is changing,” said Magnus Billing, senior vice president, Nordic fixed income at Nasdaq OMX. “We are approaching FX with a broad offering of clearable products in order to satisfy all of the drivers our members have to clear FX. MarkitSERV will be a vital element in helping Nasdaq OMX’s members to satisfy their regulatory requirements in clearing FX and to provide the tools to navigate the new regulatory environment.”

Currently, many foreign exchange (FX), money market (MM), derivative and commodities transactions are confirmed by email or fax, or not confirmed at all. The operational and settlement risks introduced by this manual process are unacceptable in today’s environment, and the regulators want to see them eliminated.

MarkitSERV’s FX clearing gateway provides executing brokers, clearing brokers, trading venues and buyside firms with a single point of access to all FX CCPs. By connecting to MarkitSERV, participants benefit from award-winning FX clearing solutions to confirm and route OTC FX transactions to CCPs with full support for client clearing, allocation of block trades and regulatory reporting.

MarkitSERV is in the process of expanding its FX support to include deliverable and non-deliverable FX options.

In addition to FX, MarkitSERV provides post-trade services for interest rate, credit, and equity derivatives as well as venue-neutral connections that link more than 2,500 market participants to 14 CCPs, trade repositories and electronic execution venues worldwide.

Post-trade processing for OTC derivatives transactions is a cornerstone of European Markets Infrastructure Regulation (Emir).

Article 11 of Emir (in force since March this year), is concerned with risk mitigation for non-centrally cleared OTC derivatives, and requires “the timely confirmation, where available, by electronic means, of the terms of the relevant OTC derivative contract.”

Depository Trust & Clearing Corporation (DTCC) and TriOptima have launched a data connectivity service between the DTCC Data Repository (U.S.) LLC (DDR) and TriOptima’s triResolve portfolio reconciliation service.

The service enables the reconciliation of OTC derivatives trades reported to DTCC’s U.S. trade repository, and is a significant step aimed at improving portfolio risk management for dealers and end users.

It will help ensure compliance with the CFTC mandated reconciliation deadline of August 23. DTCC and TriOptima anticipate that their collaboration can also be extended to market participants in Europe where portfolio reconciliation and trade reporting rules will come into effect imminently.

The Emir portfolio reconciliation rules will come into effect on September 15, 2013 and Emir mandatory trade reporting will begin on January 1, 2014.

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