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Markit and DTCC to launch OTC derivative trade processing company

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Markit and The Depository Trust & Clearing Corporation will launch MarkitServ on 1 September, a company that will combine the two organisations’ electronic trade confirmation and wo

Markit and The Depository Trust & Clearing Corporation will launch MarkitServ on 1 September, a company that will combine the two organisations’ electronic trade confirmation and workflow platforms to provide a single gateway for over-the-counter derivative trade processing.

The strategic partnership was first announced in July last year, subject to completion of due diligence, regulatory filings and approval by relevant global regulators. Due diligence is now complete and MarkitServ has received regulatory approval from the UK Financial Services Authority and the US Department of Justice.
 
Jointly owned by DTCC and Markit, MarkitServ will combine the DTCC Deriv/Serv and Markit Wire trade confirmation platforms to cover all major asset classes including credit, interest rate, equity and commodity derivatives. It will connect multiple market participants and execution venues to downstream processing platforms such as DTCC’s Trade Information Warehouse for credit default swaps. It will also connect to various central counterparty platforms for interest rate swaps and CDS, in collaboration with the DTCC Trade Information Warehouse.

MarkitServ was created in response to calls from regulators, politicians and market participants for greater cooperation within the industry over infrastructure to accelerate the adoption of electronic trade confirmation and reduce risk in the OTC derivative markets.
 
‘Our shared vision is to provide the industry with a more secure, reliable and streamlined operational environment for confirming OTC derivative transactions globally,’ says Michael C. Bodson (pictured), executive managing director of DTCC business management and strategy, and chairman-designate of MarkitServ. ‘Each of our firms has been independently successful, and this joint company will now leverage our combined expertise to extend benefits to a wider user base and across a more diverse range of financial instruments. This is certainly in keeping with DTCC’s desire to pursue partnering opportunities that reduce risk and serve the industry as a whole.’

Lance Uggla, chief executive officer of Markit, adds: ‘We have had extensive discussions with buy-side firms over the past year, and the message we keep hearing is that they need a simplified processing solution that is accessible and efficient. We believe MarkitServ will address the industry’s infrastructure needs and help the OTC derivative markets transition to a new environment of reduced risk and improved operational efficiency.’
 
MarkitServ will comprise the Markit and DTCC flagship trade processing services for affirmation, confirmation, novation, allocation and reconciliation. These include Markit Wire, Markit Trade Manager, Markit Tie-Outs and Markit PortRec in addition to the DTCC Deriv/Serv matching and confirmation engine, MCA Xpress and novation consent service.
 
It will rationalise costs by removing the need for users to connect to numerous, asset-class specific trade processing systems. Instead, clients will be able to use their existing connectivity to access a wider variety of combined services. The new company will be industry-governed and will have a global presence, including offices in London, New York and Tokyo.
 
Markit’s data and valuation services, and DTCC’s Trade Information Warehouse, life-cycle event processing and centralised settlement and payment netting services will remain part of the respective parent companies.

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