The jointly-owned entity, which will be named at a later date, will combine Markit’s and DTCC’s existing trade-processing platforms and services to provide a single processing service for OTC derivatives. It will offer automated trade affirmation, trade allocation and novation consent tools and services to the market, and will initially support both DTCC’s and Markit’s confirmation platforms.
An official at Markit told Risk the new company, which will be headquarted in London, could be ready for business within the next two months, subject to regulatory approval and completion of due diligence.
It will comprise Markit’s recently acquired Markit Wire platform (formerly known as SwapsWire) as well as its other trade-processing services, such as Markit Trade Manager, Markit Tie Out and Markit PortRec. DTCC will contribute its DerivServ matching and confirmation engine, and its AffirmXpress, MCA Xpress and Novation Consent services. Services that will not become part of the new company include Markit’s data and valuation services and DTCC’s Trade Information Warehouse, and centralised settlement and payment netting services.
“By combining the individual strengths of Markit’s trade-processing services and DTCC’s DerivServ, we are taking a major step forward in addressing the calls from global regulators and customers for a fully integrated system for processing OTC derivatives,” said Lance Uggla, chief executive officer of Markit. “We believe the time is right for consolidation around a combined framework to address the challenges of rapid growth, operational risk and high costs in the OTC derivatives markets.”
Markit expects this initiative to accelerate the use of electronic processing platforms by market participants for the $454 trillion OTC derivatives market. Currently, approximately 50% of transactions are still confirmed on paper, according to Markit.
Michael Bodson, executive managing director for DTCC’s business management and strategy overseeing all DTCC business lines, will be chairman of the new company. Jeff Gooch, executive vice-president of Markit, will be the new company’s chief executive officer.