Markit, the leading provider of independent data, portfolio valuations and OTC derivatives trade processing to the global financial markets, has agreed in principle to buy SwapsWire, the innovative electronic trade confirmation network for the OTC derivative markets. The acquisition is expected to complete in early 2008, subject to agreement of definitive documents, due diligence, shareholder and regulatory approval.
SwapsWire was the first to market with an automated service that enabled market participants to complete trade date confirmation immediately upon execution. The company provides an efficient alternative to error-prone manual processes.
Today, SwapsWire is relied upon by all major dealers, inter-dealer brokers, prime-brokers and buy-side institutions active in the global OTC derivative markets. The company is owned by a consortium of 21 derivative dealers and employs 100 staff based in offices in London, New York and Tokyo.
Lance Uggla, Chief Executive Officer of Markit, said: “The SwapsWire business is highly complementary to our current suite of data, valuations and processing products, and its confirmation capabilities fit neatly with Markit’s affirmation and workflow services. The need to automate trade processing has never been more acute, and we believe that the combination of Markit and SwapsWire delivers critical mass and will underpin the future growth of these markets, positioning us as a multi-asset class solution with strong presence in rates, equities and credit.”
Markit plans to combine the SwapsWire confirmation capabilities with its trade processing workflow platform to provide the OTC derivative markets with a cross-asset trade processing solution with critical mass and a global network. The enhanced platform will have over 200 buy-side institutions, 50 dealers, and 45 inter-dealer brokers as clients. The combined business will be co-headed by Jeff Gooch, Executive Vice President and Head of Trade Processing and Valuations at Markit, and Chip Carver, CEO of SwapsWire.
Markit’s benchmark data and services are used by almost 1,000 institutions to enhance trading operations, reduce risk and manage compliance. The trade processing business will be an increasingly important part of Markit’s overall offering to clients.
Chip Carver, Chief Executive Officer of SwapsWire, stated: “We are excited about becoming part of Markit, a fast-growing, successful company that shares SwapsWire’s entrepreneurial culture. With the relentless growth of the OTC derivative markets continuing to put pressure on operational infrastructure, and the ongoing regulatory concerns, the industry faces significant hurdles. We believe that by bringing SwapsWire and Markit together, we will be able to provide the financial markets with the best possible tools to overcome these challenges.”
Michele Faissola, Global Head of Rates at Deutsche Bank, commented: “Both Markit and SwapsWire have developed sophisticated and valued services, and we believe the combination of these two firms will support the industry's constant optimisation of operational risk management.”
David Lown, Executive Vice President at PIMCO, said: "As a client of Markit’s comprehensive workflow service, we believe this deal will be of immense value to the buy-side community. The integration of SwapsWire’s real-time confirmation tool into the Markit service will give us a cross-asset platform with electronic straight-through-processing, allowing us to support our growing OTC derivative businesses with greater operational efficiency.”
The latest statistics from the Bank for International Settlements (BIS) show that the OTC derivative markets grew by 25% in the first half of 2007, compared to a 12% increase in the second half of 2006 . The average number of outstanding confirmations doubled year-on-year, according to Markit’s latest Quarterly Metrics report which surveys key operational statistics among the top 18 dealers. Aggressive growth in volumes has led to mounting backlogs which continue to attract regulatory scrutiny.