Bank of America Merrill Lynch, Citi and Goldman Sachs has signed up as futures commission merchants (FCMs) to use MarkitServ’s Credit Centre, a pre-trade credit checking solution for the OTC derivatives market.
The service, which was unveiled in March of this year, provides buy-side firms, regional banks and other institutions that access clearing through FCMs with a consolidated view of the credit available to them. It also helps institutions determine how they deploy their credit lines among multiple execution venues.
FCMs will update credit lines in real-time during the trading day as client portfolios change, and electronic execution venues will “ping” the Credit Centre to confirm the availability of credit at the time a trader wishes to post a price or execute an order, removing the risk of a trade failing because a client firm has exceeded its credit limit. The service can also be used for checking and managing credit lines required for off-facility voice and block trades.
The low-latency system required for the service is provided by TradExpress from Cinnober.
The Credit Centre will initially cover OTC credit, foreign exchange and rates products. A centralised credit limit hub is a cost- and risk-effective solution for market participants because they can view and manage credit with just one connection rather than creating and maintaining connections to each and every trading and clearing venue in the market, the firm claims.
“Mandates to clear and electronically trade OTC derivatives require new networks, information flows and technologies, says Antonio Reyes, global head of electronic execution, OTC and listed derivatives products at Citi. “A system that provides pre-trade clearing certainty is a priority for our changing market.”
Matthew Lynes, portfolio manager at Aberdeen Asset Management, adds, “Maximising our flexibility in how we trade and where we clear is extremely important to us. Using Credit Centre to view and optimise our credit lines helps us operate more efficiently in the new world of derivatives trading.”