IHS Markit has announced new trade technology solutions from its MarkitServ unit that enable full automation of settlement and margin payments in the cross-currency swaps market.
The firm says the new solutions “help firms to reduce financial and operational risk throughout the trade lifecycle”.
Cross-currency swaps expose counterparties to settlement risk due to the high value of initial and final principal exchanges that take place in what was recently measured to be a $30 trillion market. New automation, workflow and integrations between MarkitServ and both CLS and LCH SwapAgent enable firms to automate swaps payments, including initial and final notional exchange settlements through CLS and variation margin payments with LCH SwapAgent.
“MarkitServ and our partners now deliver true, end-to-end passive asset servicing for settlement and margin processes to the cross-currency swaps markets,” says Claire Lobo, head of business development at MarkitServ. “These advances demonstrate how the network, workflow and integrations provided by MarkitServ remove the need for human intervention in post-trade processes, helping firms improve efficiency and reduce risks.”
At the beginning and end of trades, new auto-fixing functionality from MarkitServ automatically applies foreign exchange rates for initial and final notional amounts for cross-currency swaps and basis swaps settled in CLS. This enhances existing integration with CLS, the firm claims by streamlining the settlement process and mitigating settlement risk for cross-currency swaps by linking CLS’s payment-versus-payment (PvP) settlement service to MarkitServ’s trade confirmation service.
“CLS is committed to mitigating systemic risk in the global FX and OTC derivatives market, and we are continuously looking at new ways to improve our services,” says Alan Marquard, chief strategy and development officer at CLS. “End-to-end automation with MarkitServ’s trade confirmation service will further reduce settlement risk and improve efficiency for participants trading cross-currency swaps.”
During the life of the trade, new connectivity from MarkitServ to LCH SwapAgent delivers interest rate swaps trade data to SwapAgent, which acts as the central calculation agent for variation margin and settles cash and collateral exchanges. MarkitServ and LCH says they will extend this functionality to the cross-currency swaps market when those instruments go live at LCH SwapAgent later this year.
“Connecting to MarkitServ will offer our members a way of accessing our cross-currency swaps service, when it goes live later this year,” says Nathan Ondyak, global head of LCH SwapAgent. “LCH SwapAgent has been launched with significant support from the market, and in that spirit it was important that we engage with MarkitServ as the trade processing platform of choice for many firms.”