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ION Acquires Clarus to Offer Solutions for UMR, Broader Derivatives Analytics

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Trading solutions vendor ION Markets has acquired derivatives analytics specialist Clarus Financial Technology, in part to help clients to comply with the new Uncleared Margin Rules (UMR) regulation for OTC derivatives. The acquisition – for an undisclosed sum – of the provider of SaaS-delivered analytics, data and research will also broaden ION’s capabilities in the segment.

Specifically, Clarus’s analytics products for real-time margin and risk management of both cleared and uncleared OTC derivatives will complement ION’s own Janus pricing and valuation expertise. “We see the extension to cleared and non-cleared OTCs as an evolution of ION’s product offering,” says Francesco Margini, Head of Product Management for Cleared Derivatives at ION. “OTC and exchange-traded derivatives (ETDs) are converging rapidly on the back of the regulatory framework and evolving market structure, with OTCs getting closer to the ETD space now. Clarus has fantastic products for the valuation and margining of OTC instruments, which is a very complex domain, complementing our solutions in the ETD space.”

“The workflow around OTC has become very similar to ETD,” says Amir Khwaja, CEO of Clarus. “With ETDs, there has always been daily initial and variation margining, which is now required for cleared and uncleared swaps, through convergence in regulation. Being focused only on swaps, we wanted to be part of a firm that could provide swaps and futures together on the same platform. That’s what appealed to us. To be part of a bigger group that has those assets, not just swaps, but futures, fixed income, that infrastructure and client base, it’s a great strategic fit.”

The two companies expect to be able to integrate their product sets fairly rapidly, says Margini. “We took a very thorough look at Clarus’s technology and their interfaces,” he says. “We see the integration steps as being very easy because Clarus has done a tremendous amount of work in developing APIs and interfaces that allow their customers to effectively feed flow into the application and extract the results of all their calculations. They have various methodologies around the valuations and calculation of initial margin, which we can effectively take out of the box with our STP solution, where we are able to perform real time evaluation and margin for ETD contracts, but until now, we’ve not been able to offer the same service for cleared and non-cleared OTCs. By integrating with Clarus’s interfaces, we can easily plug in all the calculation methodologies that are natively supported by the Clarus product.”

The response to the acquisition announcement has been overwhelmingly positive, says Khwaja. “Our clients see that it makes sense, because they all trade both futures and swaps and can see the synergies. And that’s important for us, because we’ve built our client base from scratch and we want them to be happy about the relationship going forward.”

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