Nearly 200 representatives from the global over-the-counter (OTC) derivatives community recently gathered in London and New York for summits hosted by DTCC Deriv/SERV on Master Confirmation Agreements (MCAs) for equity derivatives. With industry members and regulators focused on improving the operating infrastructure for equity transactions, the July summits gave dealers and buyside firms the opportunity to learn about Deriv/SERV’s plans to improve efficiencies and increase automation in this segment of the market.

“While dealer and buyside firms are making it a priority to move their processing of equity derivatives trades onto an electronic platform such as Deriv/SERV,” said Gina Ghent, DTCC first vice president, Business Development, DTCC Deriv/SERV, “they must first complete a multitude of mandatory legal documentation.”

Easing the MCA burden

DTCC is developing an automated application that will streamline and expedite the steps required to execute all industry-published MCAs. This effort follows months of collaboration with market participants and industry associations to address the challenges related to these agreements.

Historically, the MCAs, which are required to create legally binding trades, have been executed between counterparties on a manual, bilateral basis. Because of the large number of products, regions and complexities related to equity derivatives, firms can face an overwhelming volume of documents to review and sign, which makes completing the agreements onerous and time-consuming.

 By finding a way to ease the burden related to MCAs, Deriv/SERV hopes to help dealers and buyside firms tackle some of the primary obstacles to increasing automation and bring greater efficiency to the OTC equity derivatives market, according to Ghent. Not only will the application assist with MCA execution, but firms also will be able to track and store previously executed MCAs – an important risk-mitigating tool for record-keeping and audit purposes.

“The summits were a good opportunity for us to come together with a large group of our customers to discuss the benefits of creating a service that will greatly assist the challenges related to MCA execution,” Ghent said. “It was an important first step in gaining consensus around this important initiative for our industry.” @