In a sign that banks are preparing themselves for big regulatory changes, Citi has become the first customer of Traiana’s post-trade central counterparty (CCP) connectivity service for the clearing of foreign exchange derivatives.
Traiana’s CCP Connect offers connectivity to central counterparties through the Harmony network, providing trade routing, affirmation, matching, allocation, and reporting services for centrally cleared over-the-counter FX options and non-deliverable forwards (NDFs). As reported last week in Squawkbox, CME Clearing is the first central counterparty to connect to the Harmony network.
The launch of CCP Connect comes as regulators globally are working on rules to steer as many OTC derivatives transactions as possible to clearinghouses to reduce risks to the financial system. While there is still uncertainty over which FX products will be mandated to be cleared, most participants accept that FX options and non-deliverable forwards will be.
Gil Mandelzis, CEO of Icap-owned Traiana, says, “The addition of central clearing in these FX instruments means that the complexity of trading and processing for clients will increase significantly and as such the role of the prime broker becomes even more important.”
Citi is one of the largest prime brokers in the foreign exchange market. Andy Coyne, global head of FX prime brokerage at the bank, says, “In the future, the client trading environment will include both cleared and non-cleared trades. In this new world it will be imperative to have a solution that handles both.”
Available to all members of the Harmony community, Harmony CCP Connect adds central clearing services to Traiana’s post-trade network used by 500 clients.