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Markit to develop new electronic service for FX options

BBR Staff Writer Published 03 July 2014

Markit is developing a new comprehensive service for electronic trade confirmation and exercise management for the foreign-exchange (FX) options market.

Jointly developed with Barclays, Citi, HSBC, JP Morgan, Morgan Stanley, Nomura, RBS, UBS, and Citadel's Global Fixed Income Fund, the solution is expected to help participants reduce operational risk and increase efficiency in management of FX options trades.

Markit FX processing managing director and head Keith Tippell said the FX options market needs a comprehensive, centralised solution for trade confirmation and exercise that reduces risk and improves efficiency.

Specifically, the new service is anticipated to centralise generation of legal trade confirmations, and enable realtime communication of exercise actions through an audited platform, and management of other lifecycle events based on a confirmed matched trade population.

Central FX trades confirmation makes it more efficient for the FX market to comply with regulatory requirements, such as pairing unique trade identifiers for regulatory reporting, while providing a foundation for compliance with future FX regulation, such as requirements for clearing.

Nomura G10 Flow Options global head Andrew Soper said the current processes required to manage FX option expiries are out-dated, and hence introduction of up-to-date techniques will aid all involved in the market.

"Creating a centralised confirmation process for all post trade functions will improve operational efficiency, reduce costs and contribute to a better functioning market," Soper said.

The new service is scheduled to be primarily deployed by MarkitSERV, Markit's trade processing service for over-the-counter (OTC) derivatives industry.

In addition, the company plans to expand the service to provide legal confirmation for non deliverable forwards (NDFs), complementing its existing MarkitSERV clearing middleware service for NDFs.