RiskTech Forum

IHS Markit offer Derivatives Post Trade Processing with New Cloud-Based Platform

Posted: 7 November 2018  |  Source: IHS Markit


IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions, today announced that MarkitSERV has introduced new, cloud-based technology for post trade processing of OTC derivatives trades. Called TradeServ, the new platform launched in September for matching, confirming and clearing trades of non-deliverable forwards (NDFs).

32 banks and major asset managers are live with TradeServ. More than 1 million cleared NDF trades have been processed using MarkitSERV this year (January through October), 80 percent more volume than in 2017 and nine times higher than 2016 for the same period.

TradeServ is a modern platform as a service (PaaS). It uses microservices architecture and cloud infrastructure to make the platform highly flexible, scalable and reliable. It provides customers with better access to trade data, easier integration and more continuous service upgrades in response to changing regulation and industry needs.

IHS Markit will migrate FX options, spots and forwards to TradeServ in the first half of 2019.

“The broad connectivity and standardized workflow from MarkitSERV are integral to efficient derivatives operations and compliance,” said Bill Stenning, managing director for clearing, regulatory and strategic affairs at Société Générale corporate and investment banking. “With the introduction of TradeServ, the clearing of NDFs to multiple CCPs has moved to a modern PaaS which is an important step forward for the industry.”

“MarkitSERV has always been the innovator that brings progress to the OTC derivatives markets,” said Brad Levy CEO of MarkitSERV. “Our success shows how markets embrace new technology when it is deployed through a trusted network. Beginning in FX, TradeServ will enable us to be even more responsive to customer needs and make it easier for users to interact with their data and customize workflows.”

TradeServ will expand to credit derivatives in mid-2019. It will use blockchain-compatible technology to supply initial trade and trade lifecycle data to the replatformed Trade Information Warehouse (TIW) from The Depository Trust & Clearing Corporation (DTCC), which will be delivered on distributed ledger. When credit moves to TradeServ, it will mark the retirement of the DSMatch platform currently used to process FX and credit.

TradeServ also provides a framework to accelerate enhancements to MarkitWire, the MarkitSERV platform for interest rate swaps and equity derivatives.

“The architecture and technology we are deploying in TradeServ make our platforms much more agile and responsive to clients’ requirements,” said Claire Lobo, senior vice president and product head for MarkitSERV. “We’ve built our new platform as a series of interoperable apps, so that when regulation changes or a new standard like SOFR is deployed in the market, we update specific apps which is much easier and faster than updating traditional software.”

Electronic trade confirmation transforms OTC derivatives markets and sets the stage for automating complete derivatives trade lifecycle

MarkitSERV has an almost twenty-year legacy of bringing technology and innovation to OTC derivatives markets.

Beginning in 2002, electronic trade matching and legal confirmation introduced by MarkitSERV was revolutionary for automating what was an expensive, burdensome and error-prone, manual process. Before this advance, it was not uncommon for a major dealer to have months of unconfirmed derivatives trades on its books, a situation so fraught with operational and financial risk that it attracted the attention of the Federal Reserve Bank of New York. MarkitSERV was key in helping major dealers eliminate those backlogs and keep commitments made to the New York Fed in 2006.

MarkitSERV introduced electronic workflows for terminating trades (2004), novations (2006), trade allocation (2010), and novation consent equals confirmation (2010), becoming the first service to fully automate the complete trade lifecycle for derivatives. While certain markets such as credit swaps have become virtually 100% electronically confirmed, the MarkitSERV platform also supports confirmation of non-standard or highly bespoke paper derivatives contracts.

Having a single platform covering all trade requirements for multiple types of OTC derivatives enabled banks and asset managers keep trade and risk systems up to date through APIs provided by MarkitSERV, user interfaces which provided position data and workflow tools to resolve trade breaks and otherwise settle their trades.

“MarkitSERV is the post-trade backbone of the OTC derivatives market,” said Ric Okun, executive vice president at PIMCO. “For almost two decades, MarkitSERV has worked in close partnership with the industry to provide the network and tools we need to operate efficiently and reduce risk. Our ability to monitor counterparty risk and manage the derivative confirmation lifecycle is facilitated by integrating our systems with MarkitSERV.”

Clearing and trade reporting: creating the network for global compliance

The network created by MarkitSERV for trade confirmation facilitated other important transformations in OTC derivatives markets. Beginning around 2004, the network became the conduit for voluntary clearing of interest rate swaps in the dealer-to-dealer market. When Dodd-Frank, EMIR and similar regulations mandated clearing for multiple derivatives asset classes and required non-dealers to begin clearing, the MarkitSERV network and workflow expanded to connect 18 CCPs clearing rates, credit, equity and FX derivatives. In 2017, more than 4.5 million cleared OTC derivatives trades were processed using MarkitSERV.

In similar fashion, the efficiency, reliability and connectivity provided by MarkitSERV is used by the industry to facilitate regulatory reporting and electronic trading of OTC derivatives. MarkitSERV enables trade reporting in nine jurisdictions worldwide and connects users to more than 150 trading venues, including 30 SEFs, OTFs, MTFs and other types of venues mandated for trading certain types of swaps.

More than 3,000 financial institutions use MarkitSERV for post trade administration of credit, equity, foreign exchange and interest rate swaps as well as compliance with global derivatives regulations. In 2017, the service processed an average of 130,000 transaction events per day.