DTCC News Briefs
DTCC and Markit to Form Strategic OTC Derivatives Partnership
Markit and DTCC have announced the formation of a new company that will combine the strengths of Markit’s front- and middle-office trade processing services with DTCC Deriv/SERV’s back-office leadership in post-trade confirmation and matching services for OTC derivative transactions.
In response to customer demand for a more secure, reliable and streamlined operational environment, the new company will provide a single gateway for confirming over-the-counter (OTC) derivative transactions globally. This will allow buy-side and sell-side OTC derivative market participants to confirm trades and to gain access to additional services provided by Markit and DTCC through a common portal.
The new company will comprise Markit’s recently acquired Markit Wire platform (formerly SwapsWire) as well as its other trade processing services such as Markit Trade Manager, Markit Tie Out, and Markit PortRec. DTCC will contribute its Deriv/SERV matching and confirmation engine, and its AffirmXpress, MCA Xpress and Novation Consent services. Additional services that will not become part of the new company include Markit’s data and valuation services and DTCC’s downstream Trade Information Warehouse, centralized settlement and payment netting services.
Global Banks Will Work With DTCC To Automate Syndicated Loan Processing
Five global banks will support DTCC’s launch of Loan/SERV, a new suite of services that will help automate and streamline the processing of syndicated commercial loans. The banks, whose representatives will serve on the initial advisory committee for Loan/SERV, include The Bank of New York Mellon, Barclays Capital, Citi, Deutsche Bank and The Royal Bank of Scotland.
Syndicated loans are complex structures involving multiple lenders for each borrower, with an agent bank acting as the liaison, transmitting information back and forth among parties. DTCC’s Loan/SERV platform will start with the introduction of two services in 2008, including a Loan Commitment Position Reconciliation service, which will enable agents to reconcile lender positions on individual loans every day. This is scheduled to launch in the third quarter of 2008. A second service, scheduled for release in the fourth quarter of 2008, will be an automated, secure communication network through which agent banks can transmit standard loan messages to market participants.
DTCC’s Loan/SERV messaging tool will use the FpML (Financial products Markup Language) standard. DTCC will leverage existing technology to build a secure network for the syndicated loan market and incorporate the new standard messages to be established by the participating industry members. Messages will either be routed directly to lenders or they can obtain the information by accessing a Web-based message hub.
DTCC Receives Regulatory Approval to Launch AIP Suite of Services
DTCC has received regulatory approval from the U.S. Securities and Exchange Commission to launch its Alternative Investment Products (AIP) suite of services. AIP, a service platform that links broker/dealers, fund managers, administrators and custodians, will provide settlement of subscriptions and redemptions for various alternative investment vehicles, automating the exchange of all trade-related account information.
Alternative investment products include funds of hedge funds, single hedge funds, Real Estate Investment Trusts (REITs), private equity funds, and energy, equipment, and commodity pool funds. Driven by investors’ desire for portfolio diversification, the market for alternative investments has grown significantly since 2000.
Alternative investments are currently handled through hardcopy, fax, email, phone calls and spreadsheets, and the lack of automation and centralization prolongs the transaction process. Not only is manual processing of these instruments error-prone, it also prevents business growth as volume outpaces the industry’s ability to manage it.
With DTCC as a central clearing facility for uniform operational functions, and thus eliminating the multiple contact points for fund sponsors, broker/dealers, administrators and transfer agents, the AIP service will streamline and automate all the processes related to trade order initiation, money settlement and post-trade reporting.