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Markit and DTCC form derivatives trade processing JV

21 July 2008  |  11625 views  |  0 Digital Abstract

The US Depository Trust & Clearing Corporation (DTCC) and UK-based Markit are teaming up to launch a London-based joint venture that will combine their respective OTC derivatives processing services.

The new company will comprise Markit's recently acquired MarkitWire platform (formerly SwapsWire) as well the vendor's other front and middle office trade processing services such as Trade Manager, Tie Out and Port Rec. DTCC will contribute its Deriv/Serv post-trade matching and confirmation engine in addition to its AffirmXpress, MCA Xpress and Novation Consent services.

The partners say the new company will provide a single gateway for confirming OTC derivative transactions globally and the initiative will accelerate the adoption of electronic processing services across the rapidly growing $454 trillion OTC derivative market where around 50% of transactions are still confirmed on paper.

The new company will offer automated trade affirmation, trade allocation and novation consent systems to the market on a cross-product basis. It will initially support both DTCC's and Markit's confirmation platforms.

"By combining the individual strengths of Markit's trade processing services and DTCC's Deriv/Serv, we are taking a major step forward in addressing the calls from global regulators and customers for a fully integrated system for processing OTC derivatives," says Markit CEO Lance Uggla. "We believe the time is right for consolidation around a combined framework to address the challenges of rapid growth, operational risk and high costs in the OTC derivative markets."

The venture will be jointly owned by DTCC and Markit and will be governed by an 11-member board of directors. Michael Bodson, executive MD for DTCC's business management and strategy, will become chairman of the new company, while Markit EVP Jeff Gooch will become chief executive officer.

The new company will be headquartered in London, with a second major centre of operations in New York and representative offices in Europe and Asia. The combined business will have over 1,100 financial institutions as customers and annual transaction volumes of over seven million across the OTC interest rate, credit and equity derivative markets.

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