MarkitSERV, the electronic trade processing service for over-the-counter (OTC) derivative transactions, has seen a surge in user numbers as it ups its connections to multiple clearinghouses to help the swaps industry comply with the first US Commodity Futures Trading Commission (CFTC) mandate, effective 11 March, to centrally clear OTC derivatives.
Institutions categorised under CFTC rules as swap dealers, major swap participants or active funds are required to centrally clear several types of interest rate swaps (in four currencies) and certain credit default swap (CDS) index trades under the new post-crash rules starting 11 March, with the intention of increasing transparency.
MarkitSERV attracted a total of 148 buy-side firms and swaps dealers in February ahead of the regulatory deadline, who used it to match and process approximately 190,000 cleared OTC swap trades. These transactions included nearly 9,000 cleared buy-side trades (transactions in which at least one party is not a clearinghouse member).
The electronic trade processing service provides a single point of connectivity for swap market participants to route trades to eight major clearinghouses that are registered with the CFTC (or have registration pending) as derivatives clearing organisations (DCOs) for OTC credit and rates products and also provides trade parties with real-time updates of clearing registration status and clearing broker take-up.
MarkitSERV automatically determines for trade parties whether a trade is subject to mandatory clearing based on Regulation 50.4 (which defines which classes of swaps must clear), Regulation 50.25 (which defines the compliance schedule for swap market participants) and the MarkitSERV database of counterparty jurisdictions. MarkitSERV also supports mandatory and voluntary real-time trade reporting and reporting of primary economic terms for both cleared and non-cleared trades.
The CTFC-registered DCOs to which MarkitSERV is connected are: CME, ICE Clear Credit, ICE Clear Europe, LCH.Clearnet LLC (SwapClear US), LCH.Clearnet Ltd (SwapClear UK), and Options Clearing Corp (OCC). MarkitSERV is also connected to Eurex Clearing AG and LCH.Clearnet SA (CDSClear), both of which have DCO registrations pending with the CFTC. The service connects to 12 clearing houses worldwide.
“When it comes to complying with regulatory deadlines from the CFTC and regulators worldwide, MarkitSERV is supporting the majority of OTC derivative market participants,” says Henry Hunter, head of product management at MarkitSERV, and the man responsible for trying to attract new business to the online service under the new regulations. “Our cross-asset class network links traders and execution venues to clearinghouses and trade reporting facilities, making it much more straightforward to manage, clear and report OTC derivatives.”