MarkitSERV, an electronic trade processing service for over-the counter (OTC) derivative transactions, has deployed its Credit Centre pre-trade service in Equinix International Business Exchange (IBX) data centers in New York and Chicago, the companies said.
MarkitSERV Credit Centre is a centralized, ultra-low-latency, pre-trade credit checking system that links traders to trading venues, clearinghouses and futures commission merchants in the OTC derivative markets.
“Companies need to connect to every SEF, CCP, and FCM, and we have always been a central point for rates, credit, and post-trade, so it makes perfect sense for us to provide a central point for pre-trade as well,” said Jeffrey Maron, managing director and head of product management at MarkitSERV.
By enabling execution venues to check credit lines before prices are displayed and orders executed, Credit Centre eliminates the risk that trades may fail at the clearinghouse due to insufficient credit.
“Every time a trade is posted by someone, the SEF will send us a query, and we will check the credit for that order, so the credit has already been checked before the trade,” said Maron.
The Commodity Futures Trading Commission’s Rule 1.73, which deals with risk management procedures by futures commission merchants (FCMs) became effective on October 1, 2012.
Rule 1.73 requires that the FCM that clears the allocated trades on behalf of the underlying customers establishes limits for such customers and enters into an agreement in advance with the account manager regarding those limits.
By no-action relief dated September 26, 2012, the CFTC granted an extension until June 1, 2013 for compliance by FCMs with a section of Rule 1.73 that relates to “bunched orders,” by which an account manager bunches orders on behalf of multiple customers for execution and post-trade allocation to individual accounts for clearing.
The Futures Industry Association has developed, in consultation with the CFTC, an action plan and industry standard agreement in order to meet the rule requirements and intends to release the agreement so that FCMs may begin distributing the document to their affected account managers.
Equinix enables direct access between MarkitSERV and the broad ecosystem of major players and newcomers to the OTC market already inside Equinix, including a wide range of suppliers, customers and partners.
“By deploying their critical infrastructure among the existing trading ecosystems in New York and Chicago, MarkitSERV is now strategically positioned to directly connect to a wide range of endpoints in the emerging OTC ecosystem and more efficiently serve client requirements,” said Stewart Orrell, managing director of global financial services at Equinix.
Since the Dodd-Frank Act was enacted in 2010, OTC derivatives transactions have been moving to electronic and hybrid execution platforms.
MarkitSERV provides a single gateway for OTC derivative transaction processing globally.
More than 100 dealers, 70 inter-dealer brokers and 2,500 buy-side institutions are connected to MarkitSERV services, which handled in excess of 20 million confirmations in the last year.
