Following the signing of a partnership agreement in July last year, Markit and the Depository Trust & Clearing Corporation (DTCC) have finally announced the launch date for their joint venture in the derivatives trade processing space. The vendors will be launching MarkitServ, which combines DTCC’s DerivServ workflow platform and the (ex-Swapswire) Markit Wire trade confirmation platform, on 1 September.
The joint venture has recently received approval from the UK Financial Services Authority (FSA) and the US Department of Justice (DoJ) to begin operations, following the vendors’ completion of due diligence. The platform will cover all major asset classes including credit, interest rate, equity and commodity derivatives and seeks to connect the post-trade data dots and plumbing for these instruments.
It will connect multiple market participants and execution venues to downstream processing platforms such as DTCC’s Trade Information Warehouse for credit default swaps (CDS). It will also connect to various central counterparty (CCP) platforms for interest rate swaps and CDS, in collaboration with the DTCC Trade Information Warehouse.
MarkitServ will connect the buy and sell side communities with a single electronic gateway for trade processing across asset classes, explains Jeff Gooch, executive vice president of Markit Trade Processing and Portfolio Valuations, and CEO designate of MarkitServ. “We will help market participants meet their commitments to regulators globally to reduce operational risk and adopt clearing for the OTC derivative markets,” he says.
The rationale behind the launch of the new company is to provide the market with access to a simplified OTC derivatives trade processing solution and reduce the risks in this particularly opaque corner of the market. Given that both vendors are dominant in their respective spaces, the combination of both their offerings should give the venture a good grounding to gain traction swiftly in the market.
Michael Bodson, executive managing director of DTCC Business Management and Strategy, and chairman designate of MarkitServ, explains: “Our shared vision is to provide the industry with a more secure, reliable and streamlined operational environment for confirming OTC derivative transactions globally. Each of our firms has been independently successful, and this joint company will now leverage our combined expertise to extend benefits to a wider user base and across a more diverse range of financial instruments. This is certainly in keeping with DTCC’s desire to pursue partnering opportunities that reduce risk and serve the industry as a whole.”
Lance Uggla, CEO of Markit, adds: “We have had extensive discussions with buy side firms over the past year, and the message we keep hearing is that they need a simplified processing solution that is accessible and efficient. We believe MarkitServ will address the industry’s infrastructure needs and help the OTC derivative markets transition to a new environment of reduced risk and improved operational efficiency.”
MarkitServ will comprise the Markit and DTCC flagship trade processing services for affirmation, confirmation, novation, allocation and reconciliation. These include Markit Wire, Markit Trade Manager, Markit Tie-Outs and Markit PortRec in addition to the DTCC DerivServ matching and confirmation engine, MCA Xpress and novation consent service.
According to the vendors, MarkitServ will rationalise costs by removing the need for users to connect to numerous, asset class specific trade processing systems. Instead, clients will be able to use their existing connectivity to access a wider variety of combined services. The new company will be industry governed and will have a global presence, including offices in London, New York and Tokyo.
Although Markit has received the green light for this venture from the DoJ, the vendor remains under investigation by the regulatory body’s Antitrust Division. It is assumed that the investigation is concerning its ownership structure with regards to its pricing practices.