New OTC Derivatives Post-Trade Clearing Utility Launched to Streamline Processes & Costs

The OTC derivatives clearing space is to benefit from a new advanced utility that aims to strengthen the evolving sector. SunGard, a leading provider of technology solutions to financial services firms, will provide an outsourced solution to global banking giant, Barclays, to support the management and processing of certain OTC derivatives transactions. The new solution offers a customised approach to the back office process.

SunGard reported its cooperation with Barclays, aiming to revolutionise the way OTC derivatives transactions are processed. The specialist technology provider will enable derivatives providers, including Futures Commission Merchants (FCMs) registered in the United States, to enhance their current offerings. The new solution aims to provide higher efficiency, lower costs and total cost of ownership (TCO) by leveraging economies of scale in middle and back office processing and technology.

Barclays will become the utility’s first live client, in addition to using the services the outsourcing process means that Barclays will also migrate specific futures and OTC derivative clearing operations and technology processes to the utility, and a number of Barclays employees will transfer to SunGard.

Brian Traquair, Executive Vice President of SunGard Financial Systems, commented in a statement, “Post-trade cleared derivatives processing is highly commoditized, providing little differentiated value to each firm at increasingly higher costs due to today’s regulatory environment. SunGard’s post-trade derivatives utility will help transform the cleared derivatives middle and back office across the entire industry, resulting in a more sustainable operating model and cost structure for the future. We are investing in and building this solution and others like it as part of the `Next SunGard` to continue to advance best practices across the industry in terms of operational controls and operational Risk Management at a more manageable cost.”

The financial markets operating environment has been under the radar after certain OTC products were blamed for the collapse of banking giant Lehman brothers in 2008 and its open-exposure to Credit Default Swaps. As a result, policy makers, governments and industry practitioners have been updating the way OTC products are traded.

New Rules

The industry responded by establishing new rules such as the Dodd-Frank Act in the United States, EMIR in Europe, coupled with new trading venues such as Swap Execution Facilities.

Tim Stack, Head of Agency Derivatives Services at Barclays, added, “Barclays has always taken a proactive approach to managing its business and adapting to Regulation . By taking this leadership position with SunGard, we are able to provide our clients with a practical solution that keeps our products and services at the forefront of the industry. We are confident that this utility is a transformational change for the industry, and that it will help provide clear benefits to our clients, to Barclays and to the industry as a whole.”

Listed instruments provide greater safety for users as the exchange acts as the counterpart to trades; several exchanges have introduced hybrid contracts that provide the security of listed instruments but the flexibility of OTC instruments.