Citi and JP Morgan back MarkitSERV rival

Big dealers revealed as first bank clients of swaps start-up truePTS days after legal settlement

Clients of truePTS will see a 50–60% reduction in per-ticket processing fees, says the platform’s chief executive

New derivatives trade processing platform truePTS, which was embroiled in a legal battle with IHS Markit earlier this year, has signed up Citi and JP Morgan as clients.

The news is a coup for the platform, which was spun out of swap execution facility (Sef) trueEX. The company’s future has been under a cloud since May 8, when trueEX accused IHS Markit in a lawsuit of attempting to muscle it out of the post-trade services business.

However, the companies reached an out-of-court settlement on November 30 that cleared the way for truePTS to begin offering its services to clients.   

Citi and JP Morgan are the first dealers to publicly back the platform, but truePTS chief executive Zohar Hod says several other clients are in the pipeline. “We are going to create choice and innovation in the post-trade processing world for derivatives. These two banks are adding to our network rather than replacing any other technology, and like every other part of financial services, we expect multiple providers for processing services,” he says.

Hod says truePTS clients will see a 50–60% reduction in per-ticket processing fees: “45% of trades are still off-Sef today, so there are many errors – not just in deal entry but also in post-trade when a trade is sent to clearing, for example. Our motto is ‘no touch’, so if we can get to an environment of true automation like in equities, then we can achieve significant cost savings as an industry,” he says.

The existence of truePTS appeared to be under threat earlier this year after trueEX sued IHS Markit for allegedly threatening to terminate an agreement allowing it to access MarkitSERV, a trade processing platform for interest rate swaps.

MarkitSERV allows swaps counterparties to match buyer and seller records, confirm the terms of trades, and allocate aggregated trades to accounts, among other functions. The platform is also used to submit trade details to central counterparties and report transactions to swap data repositories.

The vast majority of trueEX’s 14 liquidity providers, and another 10 that were in the process of onboarding at the time, relied on MarkitSERV to receive counterparty transaction details known as drop copies. If it lost access to MarkitSERV’s drop copy service, trueEX claimed the bulk of its liquidity providers would abandon the venue – effectively driving it out of business.

Zohar Hod: true automation can deliver big cost savings

MarkitSERV responded that trueEX required its buy-side customers to submit trades to central counterparties and swap data repositories via its own competing platform, truePTS, while other Sefs give market participants a choice. In a May 25 court filing, Brad Levy, chief executive of MarkitSERV, said trueEX was “seeking to inappropriately leverage” its access to the drop copy service for the benefit of a competing business.

IHS Markit’s attorney, Colin Kass, a partner at Proskauer Rose, said in June that the company was terminating trueEX’s access to MarkitSERV to prevent truePTS “free-riding” on the firm’s technology. trueEX obtained a preliminary injunction that allowed its Sef to continue accessing MarkitSERV until March 2018, when the case was scheduled to go to trial. However, the two firms settled their differences in November.

Under the settlement, trueEX was allowed to continue using MarkitSERV, but had to give its customers the option of using it to send their trades to clearing houses.

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