MarkitSERV, the electronic trade processing service for OTC derivative transactions, announced the launch of MarkitSERV Credit Centre, a pre-trade credit checking solution for the OTC derivatives market. MarkitSERV Credit Centre provides clearing certainty for trades executed in electronic marketplaces, including swap execution facilities. This will help firms meet regulatory requirements, including Dodd-Frank.
MarkitSERV Credit Centre provides buy-side firms, regional banks and other institutions that access clearing through futures commission merchants (FCMs) with a consolidated view of the credit available to them from their FCMs. It also helps institutions determine how they deploy their credit lines among multiple clearing venues.
FCMs will update credit lines during the trading day as client portfolios change, and electronic execution venues will “ping” Credit Centre to confirm the availability of credit at the time a trader wishes to post a price or execute an order, removing the risk of a trade failing because a firm exceeded its credit limit. The service can also be used for checking and managing credit lines required for off-facility voice and block trades.
The ultra-low-latency system required for Credit Centre is provided by TRADExpress from Cinnober, a leading global supplier of solutions and services to major trading and clearing venues.
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Jeffrey Maron, Managing Director at MarkitSERV, said: “As a trusted provider of financial market infrastructure, MarkitSERV is highly-qualified to offer clearing certainty through our Credit Centre. Dodd-Frank requirements give rise to a series of challenges for the industry around electronic trading and central clearing. The need for trade certainty is top of the list. Our ultra-low-latency service will allow participants to transact with confidence.”
Veronica Augustsson, CEO at Cinnober, said: “We are pleased to have been chosen to provide the low-latency, robust system required by MarkitSERV Credit Centre. Our proven, high-performance TRADExpress software makes us the natural choice for powering MarkitSERV’s clearing certainty hub.”
Will Rhode, Principal and Director of Fixed Income Research at TABB Group, said: “Ever since regulators proposed a horizontal structure for the clearing and execution of swaps, the industry has been struggling to understand how to manage the so-called ‘certainty of execution’ issue, or the risk of a trade being rejected in a fragmented clearing environment. Solutions that help rationalise this and provide greater visibility into credit eligibility will be welcomed by clearing brokers, executing brokers and swaps users alike.”
Technology development for the first phase of Credit Centre is complete and onboarding for buy-side firms and FCMs is already underway. Firms can register at MarkitSERV.com to begin testing.
MarkitSERV Credit Centre will initially cover OTC credit, foreign exchange and rates and will expand to other instruments – such as equity derivatives, futures and options – and to managing credit for non-cleared trades. A centralised credit limit hub is a cost-effective solution for market participants because they can view and manage credit with one connection rather than creating and maintaining connections to every trading and clearing venue in the market.