Data, portfolio valuations and OTC derivatives trade processing vendor Markit has released a new license for its Reference Entity Database (RED) for smaller buy side firms.
Under the terms of the new license, asset managers with low credit default swap (CDS) trading volumes that use DTCC Deriv/SERV for trade confirmation will gain free access to RED.
The new license is part of the vendor’s attempts to reach more participants in the OTC derivatives market and supports the commitments made by the Operations Management Group (OMG) to the New York Federal Reserve in March this year to improve OTC derivative trade processing.
“We are keen to encourage the broad buy side community to adopt RED,” says Ed Chidsey, director of Markit RED. “We recognise that one size doesn’t fit all and have now developed a new licence for the smaller firms.”
This also represents the first time that the vendor is offering access to Markit RED for free to buy side clients, adds Chidsey. “Recognising that there are a number of smaller buy side clients that have not yet adopted Markit RED, we wanted to offer a license that is free to clients processing low volumes of CDS trades. As they grow, a scaling fee will apply in conjunction with trading volumes,” he explains.
According to Chidsey, the license was developed because smaller buy side firms had expressed an interest in using Markit RED to reduce legal and operational risk in trading, documentation and trade settlement. However, they had indicated that they were deterred from taking up a full licence due to the low volumes of CDS trades they were doing, and therefore the decision was taken to offer access for free.
Chidsey believes it will be a busy few months for the vendor: “We will work through our existing client base, industry forums and other channels to inform prospective clients of this new license and highlight the benefits of Markit RED.”
Markit’s plans to extend its coverage to smaller firms fall in line with the OMG’s commitments to streamline the processing of credit and equity derivatives trades, which it outlined in a letter to Fed president Timothy Geithner in March.