26 May 2009, Ryan Davidson, Risk magazine
The two firms announced their partnership to form a new company to serve the over-the-counter derivatives markets in July 2008, but they are still working on finishing all required regulatory documentation before it can complete. Jeff Gooch, global head of portfolio valuations and co-head of global trade processing at Markit in London, will become chief executive of the combined company. He expects the firms to be granted official approval from the US Department of Justice and the UK Financial Services Authority by the end of June.
The jointly owned entity, which has not yet been named, will combine Markit's Markit Wire platform, and its other trade-processing services, including Markit Trade Manager, Markit Tie Out, and Markit PortRec, with DTCC's Deriv/Serv platform, AffirmXpress, MCA Xpress and Novation Consent services. This will result in a single processing service for OTC derivatives that automates trade confirmations, trade allocations and novation consent services.
One market participant anticipates that the combined firm will make it easier for users of either system to match their trades.
"The joint venture between MarkitWire and Deriv/Serv should make the post-trade matching process much more efficient. It will hopefully mean that users can book trades through one platform and have them match the counterparty on the other," said Paul Bachler, head of equity derivatives operations at Royal Bank of Scotland in London.
The combination will involve sharing the client base of the two firms, and any new products and services the merged company creates will mean they will no longer have to both develop the same set of products for the same users.
"The joint company will accelerate the take-up of automated processing, because we can reduce the cost and also avoid confusion among the buy side with two companies offering the same service," commented Peter Axilrod, managing director of DTCC's Deriv/Serv in New York.
Markit's Gooch believes this will mean the OTC derivatives industry will be able to more quickly meet its goals for reducing post-trade processing times, work that is being co-ordinated by the Operations Management Group (OMG) - a collective of 16 major dealers and several industry associations, including the International Swaps and Derivatives Association. The OMG has repeatedly agreed higher and higher targets for cutting down post-trade processing times with the Federal Reserve Bank of New York.
"Combining the company will help speed up the OMG's progress with meeting its goals by improving efficiency and reducing duplicated efforts to develop the same services to the same group of customers," said Gooch.
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