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OTCX-SimCorp Partnership Takes On MiFID II Compliance

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OTC derivatives multi-dealer platform OTCX’s recently announced partnership with investment management solutions provider SimCorp makes the OTCX Request For Quote (RFQ) platform more widely available – and capitalises on the platform’s value for MiFID II compliance, according to Nicolas Koechlin, CEO of OTCX.

“We started the OTCX concept a little before MiFID II kicked in,” he says. “It kept frustrating me to see how manual the processes were for many of the fund managers and transactions I was working with. Internal systems were getting quite sophisticated, so we could generate digital structured messages, but it had to be communicated on chat or voice. I wanted to see if we could bring the platform process to a wider range of instruments, so we could capture all these different styles and bring them into a structured format.”

SimCorp has integrated the OTCX RFQ platform into its Order Manager, facilitating trade reconstruction, best execution policy compliance and application of required timestamps. MiFID II adds new rules governing OTC derivatives transactions, and the OTCX RFQ platform helps support compliance with those rules.

“MiFID II forces people to be more transparent about their process and be able to evidence that on demand,” says Koechlin.

Australian fund manager Merlon Capital Partners, a SimCorp client, tested the OTCX platform, and under the new partnership, Merlon can directly source and trade equity derivatives. OTCX, according to Koechlin, plans to build on the reach it is gaining through SimCorp by pursuing new user firms directly, including more asset management firms in Australia and the Asia-Pacific region.

OTCX also offers trading of interest-rate swaps and inflation swaps, and is planning to roll out capability for cross-currency swaps. The platform is testing its services with ten Tier 1 firms in London and a global firm’s US arm, Koechlin adds.

“We developed what we think is the first dealer-to-client cross-currency swap RFQ model,” he says. “With SimCorp, we’re the only ones to offer end-to-end integration around instruments like cross-currency swaps.”

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