Trade Reporting Service Launched in Hong Kong

Terry Flanagan

MarkitSERV, an electronic trade processing service for over-the-counter derivatives, is reporting interest rates and FX derivative trades to the trade repository operated by the Hong Kong Monetary Authority. The service went live on December 10, 2013 allowing for compliance with Hong Kong’s interim reporting regime.

“The successful launch of our reporting service to the Hong Kong Monetary Authority’s trade repository is another milestone for Markit in Hong Kong, complementing our recent connectivity to the Hong Kong Exchanges and Clearing’s OTC clearing service,” said Kevin Gould, president of Markit and head of Markit Asia Pacific. “We continue to work closely with customers in Hong Kong and globally to help them comply with new regulations while managing their compliance costs.”

In Asia Pacific, MarkitSERV connects its 2,600+ customers to the derivatives clearing services run by the Australian Securities Exchange (ASX), Japan Securities Clearing Corporation (JSCC) and the Singapore Exchange (SGX). MarkitSERV also connects its customers to the derivatives reporting services run by DTCC and the Hong Kong Monetary Authority.

Building on its processing platforms, MarkitSERV has enhanced its connectivity and service offerings to assist customers in meeting the rapidly evolving OTC derivatives regulatory regimes. Through MarkitSERV, industry participants have an effective single point of access to 15 clearinghouses, as well as three global trade repositories. MarkitSERV is also used by Swap Execution Facilities (“SEF”) for some or all of trade routing to clearinghouses, SEF confirmation and regulatory reporting.

MarkitSERV Credit Centre provides an ultralow latency service with which SEFs and other electronic trade execution venues confirm the availability of credit on both sides of a transaction at the time a trader posts a price or executes an order.

Pre-trade certainty of clearing is required to prevent failed trades and to support recent Commodity Futures Trading Commission guidance which states that SEFs must provide impartial access to their platforms and enable all users to post buy and sell orders, as well as accept orders posted by others. The CFTC also requires the voiding of trades which fail to clear due to insufficient credit, meaning that firms risk unanticipated financial exposure in the event they are not able to enter or exit a position.

“With the CFTC’s mandate to trade certain OTC derivatives using SEFs approaching, we see a growing focus in the industry on the connectivity and workflows required for the efficient operation of the SEF market,” said Jeffrey Maron, managing director at Markit. “Part of the challenge of trading on SEFs is the need to confirm that counterparties have sufficient credit in place to back each order that enters the market.”

Credit Centre also gives trading firms control over how their credit lines are deployed and prevents the fragmentation of credit lines among multiple SEFs. The service keeps the size of credit lines private with trading venues only receiving confirmation of whether a party has sufficient credit to do a trade.

Maron continued, “We designed MarkitSERV Credit Centre in consultation with the buyside, regional banks, SEFs, futures commission merchants and clearinghouses to create a solution that addresses the needs of all market participants.”

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