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MarkitSERV Launches Interdealer Trade-Date Clearing Service for CDS

Deutsche Bank, J.P. Morgan, Morgan Stanley Put First Trades Through MarkitSERV’s New Conduit.

MarkitSERV, the most widely used electronic trade processing service for OTC derivative transactions, today announced the launch of trade-date clearing for inter-dealer credit default swap (CDS) trades through its trade matching and routing service.

Late last week, Deutsche Bank, J.P. Morgan and Morgan Stanley were the first institutions to use MarkitSERV’s new system to match and route credit trades for clearing, in close to real time. The trades were cleared by ICE Clear Credit. The vast majority of cleared CDS trades are currently cleared in batches on a five-day cycle. MarkitSERV’s real-time trade processing platform now allows each trade to be individually routed to the clearinghouse and cleared immediately following execution. Proposed regulation in the US and Europe is likely to mandate clearing of eligible OTC derivatives on a timely basis.

Using the new service, counterparties approve and route each trade for clearing immediately after execution. Trade details submitted electronically by counterparties to MarkitSERVthe new service are verified, matched and transmitted directly to the clearinghouse. After the trade is successfully cleared, parties are notified via the MarkitSERV service. MarkitSERV also supports real-time submission of trades by inter-dealer brokers and electronic trading platforms. More than 100 execution venues submit trades through MarkitSERV already in credit, interest rate and equity derivative markets.

Stuart McClymont, Managing Director, Head of Market Initiatives and Business Architecture at Deutsche Bank, said: “This is a significant milestone for the OTC derivatives industry. Delivering infrastructure that can support both cleared and non-cleared transactions on a single platform maximises the control and efficiency around OTC derivative processing. Deutsche Bank is at the forefront of leading automation in the OTC derivatives infrastructure and we see this as another critical step in that direction."

Lawrence Waller, Managing Director at J.P. Morgan, said: “As the CDS market infrastructure evolves in line with regulatory developments, we’re pleased to be working with MarkitSERV to lead the development of efficient and robust operational processes which benefit the entire marketplace.”

Oliver Stuart, Global Head of Derivative Operations at Morgan Stanley, said: “Morgan Stanley uses MarkitSERV to facilitate confirmation and clearing of derivatives in the major asset classes – these new capabilities for CDS clearing are an important step forward.”

Henry Hunter, Head of Product Management at MarkitSERV, said: “We are pleased to offer the solution and connectivity that market participants require to match and deliver their interdealer CDS trades for central clearing on trade date. Our service offers a single point of connectivity to multiple clearinghouses and a uniform process to manage all types of derivatives trades, regardless of asset class and eligibility for clearing.”

MarkitSERV’s new service for inter-dealer CDS clearing joins a host of other clearing solutions in which MarkitSERV acts as a universal adaptor for multiple execution venues and clearinghouses. MarkitSERV has been certified by, or established links to, LCH.Clearnet, CME, SGX and IDCG for direct submission of interest rate derivative transactions for clearing, and to CME, ICE Clear Credit, ICE Clear Europe and Eurex for direct submission of credit derivative transactions for clearing. MarkitSERV is also engaged with over a dozen other clearinghouses worldwide and will link to more as they launch.

MarkitSERV has been an important conduit for clearing interdealer swaps since 2004, when it began delivering inter-dealer interest rate swap trades to LCH.Clearnet.