The need to provide compliant solutions for OTC derivatives clearing which satisfy the criteria set out in March this year by the US Commodity Futures Trading Commission (CFTC) led to many trade processing companies focusing on preparing their clearing products in anticipation of the new procedure, required by the Dodd-Frank Act.
Four Months On, Trade Clearing Exceeds 600,000
One such trade processing company to provide a Dodd-Frank compliant solution was MarkitSERV, introducing its Dodd-Frank compliant functionality on March 11, which was followed shortly afterwards by the Clearing Certainty Hub for OTC derivative products.
Today, MarkitSERV has announced that within the three and a half month period between its inception on March 11 and the end of July, in excess of 600,000 Trades Submitted to Clearing via MarkitSERV. It is important to note that this figure represents all OTC derivatives cleared, and that the company did not make a distinction between FX and other asset classes.
Based on this number of trades which were submitted to clearinghouses by MarkitSERV during this period, MarkitSERV lays claim to being the most widely-used trade processing service for OTC derivatives, with the company’s most recent clearing connection being that of LCH.Clearnet LLC (SwapClear US), which commenced in June this year.
In order that all aspects of the OTC trading spectrum are covered, trade processing companies have been busily engaged in adapting their services to ensure all types of derivative can be processed in accordance with the requirements specified by the Dodd-Frank Act.
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Prior to that, Forex Magnates attended a discussion panel in London with regard to this matter, during which ForexClear’s CEO Gavin Wells explained that some ambiguity was present surrounding central counterparty clearing methodology: “For us, the additional part surrounding transparency of Central Counterparty Clearing Houses (CCPs) activities is still a little unclear. We are still working to understand what the regulators want us to make transparent, and how we will be required report such information to them” stated Mr. Wells.
Firms And Clearing Houses Alike
In the first half of 2013, the volume of trades submitted for clearing using MarkitSERV was up 48% from the same period in 2012, and included more than 120,000 client trades which are categorized as transactions in which at least one party is not a member of a clearinghouse, on behalf of approximately 280 firms.
More than 300 buy-side firms became new subscribers of MarkitSERV’s clearing connectivity so far this year in order to comply with CFTC mandates and to gain an efficient solution for clearing derivatives in multiple asset classes at multiple clearinghouses.
This process has not been without regulatory backtracking however, as prior to the final rulings being set on how to handle trade reporting via repositories, the US regulatory authorities removed the FX asset class from the trade vault operated by IntercontinentalExchange, the Clear Credit and Clear Europe divisions of which MarkitSERV connects to, as well as providing other connections to CME, LCH.Clearnet LLC (SwapClear US), LCH.Clearnet Ltd (SwapClear UK), and Options Clearing Corp (OCC).
MarkitSERV is also connected to Eurex Clearing AG and LCH.Clearnet SA (CDSClear), each of which has derivatives clearing organization registrations pending with the CFTC.
Henry Hunter, Managing Director and Head of Product Management for MarkitSERV made a statement on behalf of the company with regard to reaching the 600,000 trade milestone: “The CFTC’s Category 2 deadline affected a large number of firms and the industry has accomplished a lot in a short time.”
“Firms need a seamless trade management process for the front, middle and back office, so they can meet obligations to clear trades moments after they execute. MarkitSERV gives customers a practical cross-asset class solution that helps them process, clear and report OTC derivative transactions” concluded Mr. Hunter.