IHS Markit (Nasdaq: INFO), a provider of information, analytics, and solutions for the financial services industry, has added CME Clearing to its netting synchronization service from MarkitSERV, the group’s trade processing platform for over-the-counter (OTC) derivatives, per an IHS statement.
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Clearinghouses currently net exposures in a bid to mitigate the capital and operational costs associated with OTC derivatives. On CME’s part, this comprehensive service supports netting of cleared interest rate swaps, basis swaps, forward rate agreements, overnight index swaps and swaptions.
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The new service is important as it helps provide a consolidated and singular source of electronic messages via multiple clearinghouses – this in turn enables banks and asset managers to update their respective risk management systems when trades are netted or compressed at the clearinghouse.
Furthermore, the on-boarding will see a new tranche of post trade events added to the broader OTC market, which will help calibrate bank risk systems when positioning data change. This is due to netting, novation, termination, and several other events in the derivatives lifecycle.
According to Claire Lobo, Managing Director and Head of Business Development for MarkitSERV at IHS Markit, in a recent statement on the new addition: “Netting introduces a new set of post trade events to the OTC derivatives market and the need for banks and asset managers to consume netting data from multiple clearinghouses illustrates the value of MarkitSERV’s central hub and global network.”
“MarkitSERV synchronization is an important solution for our clients because it enables straight-through processing of post trade services like netting, coupon blending, and compression. This also paves the way to deliver further efficiencies and innovations as we scale out swaption clearing and develop listed invoice spread trading,” added Sunil Cutinho, President of CME Clearing, in an accompanying statement.