Founded in 1999, and with offices currently in five continents, TradingScreen, an independent provider of liquidity, trading and investment technology via Software as a Service (SaaS) solutions, has announced the launch of RiskHub, a product designed to help Futures Commission Merchants (FCMs) provide real-time credit checks to comply with Title VII of the Dodd-Frank Act, which is also known as the Wall Street Transparency and Accountability Act of 2010.
More specifically most swaps are now subject to mandatory clearing, and FCMs have just sixty seconds to perform real-time credit checks before their customers’ trades are accepted by an OTC derivatives market’s central counterparty (CCP) for subsequent clearing. However, this 1 minute window may become increasingly narrower as according to CFTC documents, “as soon as technologically practicable” is an evolving standard subject to interpretation. Specific guidance on this subject with regards to regulations 1.74, 37.702(b), 38.601, and 39.12(b)(7) which establish STP requirements for FCMs, SEFs, DCMs and DCOs respectively, can be found on the CFTC website.
As per the official press release from TradingScreen, because mandatory trade reporting requirements in the U.S. have already gone into effect for Interest Rate Swaps (IRS) and index Credit Default Swaps (CDS), the volume of trades being centrally cleared has risen dramatically. On this basis, the launch of RiskHub may be timely if it can take off and be adopted by the FCMs involved in this segment and those preparing to enter it.
Cloud Aggregation Services
As the benefits of cloud-based solutions become more apparent to the delivery of financial services technology solutions, TradingScreen aims to build upon this method by leveraging SaaS delivery through a cloud-based system. The company is no stranger to working on large deals with trading venues, and has built a diverse business across equities, fixed income, listed derivatives and related technology driven aspects of supporting buy-side and sell-side companies, including offering price discovery and matching solutions, and TradeFX, a foreign exchange platform for brokerages, and a robust transaction cost analytic (TCA) offering.
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Commenting in the corporate announcement, Philippe Buhannic, CEO of TradingScreen said, “TradingScreen’s RiskHub Solution allows our clients to execute the required calculations in an instant.” Mr. Buhannic emphasized the importance of time during the pre-trade process and said in the corporate statement, “Today, the credit check deadline is 60 seconds, but someday soon it could be even shorter. We are pleased to offer a solution that meets the tough requirements of today, and has also anticipated the regulatory developments of tomorrow.”
Speed of Practicability
The duration allotted by regulators as being technologically practicable, with regards to mandatory time frames that order-related processes must fall within, may decrease over time as solutions become faster. “TradeHub is a super-fast, pre-trade system backed by the most sophisticated risk methodology available today, including VAR, risk factors, and SPAN,” said Mr. Buhannic regarding the level of risk-analysis of the new product, in today’s press release. “RiskHub represents the next generation of risk technology, leapfrogging the current post-trade environment that has been the mainstay of the industry for the past few years.”
With regards to regulatory differences in Europe, Mr. Buhannic noted the lead the U.S has and said,“The timetable for the implementation of the European Market Infrastructure Regulation, or EMIR, is slightly behind Dodd-Frank, but regulators there seem to be moving in the same direction.”
Mr. Buhannic concluded his statement in the press releases regarding some of the challenges faced by participants, “The new compliance realities have FCMs and other market participants scrambling to keep up. TradingScreen customers appreciate our cloud-based system, which keeps them on top of present and future regulatory changes, without forcing them to ramp up overhead or staff.”
The appearance of cloud-based solutions in technology offerings is expected to grow in Forex Magnates’ opinion, as co-location and reduced latency play a pivotal role in market efficiencies.