Formicary bids to smooth clearing house membership for OTC derivatives

Source: Formicary

Formicary, a leading software and systems integration provider, is today launching two new clearing solutions: a Central Counterparties (CCP) on-boarding solution to cost effectively facilitate a smooth, swift and successful on-boarding process for new members of LCH.Clearnet Ltd's (LCH.Clearnet) SwapClear facility, and also a Fire Drill readiness solution for existing members.

Based on Formicary's extensive experience working with LCH.Clearnet and systems integration expertise, the new offerings assist new and existing members to effectively comply with the requirements of membership.

Background: Regulations such as the European Market Infrastructure Regulations (EMIR) and the Dodd-Frank Wall Street Reform and Consumer Protection Act dictate that standardised OTC derivatives trading must go through a clearing process to help mitigate systemic risk. For financial services organisations already under pressure in a changing market, this means ensuring that the infrastructure and business processes in place are compatible with the requirements of central clearing.

Using its deep understanding of SwapClear processes, Formicary eliminates the learning curve faced by in-house teams to develop the necessary connectivity and reconciliation solutions. This significantly reduces the time and cost to comply. Formicary achieves this by evaluating the key areas around the clearing process within an organisation, including novation; payment netting; default management; back-loading of existing trades; valuation assistance and workflow management. In addition, technical integration includes extending MarkitWire connectivity, creating trade loader for sample default portfolios and developing appropriate reconciliation tools to integrate with the clearing house system.

"Organisations shouldn't underestimate the complexity of the work needed to integrate their systems with those of a clearing house," warns Greville Lucking, chief operating officer, Formicary. "Most companies run a bespoke myriad of separate systems which have been accumulated over the years. These will have to be adapted in order to be compatible with the external systems of the clearing house and the additional pressure that will be placed on them. While the regulations won't come into force until 2012, organisations should be putting plans in place now in order to avoid a costly and ill-thought through last minute response."

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