HKEx Taps MarkitSERV from Markit, for OTC Rates and FX Clearing, Connects CCP Solution

With offices in over 20 locations across the globe, Markit, a global financial information services company catering to the needs of investment banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies, has today announced that MarkitSERV, its global electronic trade processing service for over-the-counter derivatives, now connects customers to OTC Clearing Hong Kong Ltd. (OTC Clear).

Established by Hong Kong Exchanges and Clearing Limited (HKEx), OTC Clear is an OTC derivatives clearing service that started clearing interest rates and FX derivatives on November 25, 2013, and MarkitSERV is the first global trade processing middleware service to connect to it, as per the announcement.

Commenting in the official corporate press release, Henry Hunter, managing director and global head of derivatives processing at Markit said:

“We worked very closely with HKEx and our customers to deliver a solution that provides an efficient way to manage the trade flows for central clearing. The addition of HKEx to our global OTC clearing gateway serves customers in this very important region and reinforces our commitment to delivering the most flexible, efficient and future-proof clearing solution for the OTC market.”

HKMA Reporting from Early December

According to the official press release, MarkitSERV will also connect customers to the Hong Kong Monetary Authority’s (HKMA's) new trade repository and will provide workflows to facilitate compliance with trade reporting requirements in Hong Kong from early December onwards. This deal expands an already strong offering in Asia where MarkitSERV connects over 2,600 customers to the derivatives clearing services run by the Australian Securities Exchange (ASX), Japan Securities Clearing Corporation (JSCC) and the Singapore Exchange (SGX).

On its website, Markit lists its MarkitSERV product - which covers multiple asset classes, of these, foreign exchange instruments include FX spot, forwards, options and non-deliverable forwards (NDF).

MarkitSERV is just one of an extensive library of products covering the financial services markets' spectrum, thus indicating the broad coverage the company has gained.

Hong Kong Exchanges and Clearing Limited (HKEx)

Created by HKEx, as a Central Counter-Party (CCP), OTC Clear assumes the counterparty risks associated with the trades it clears thus mitigating said risk from financial market participants which would otherwise be the counter-party to respective clients' trades. OTC Clear’s rights and Obligations to the trades remain outstanding until the trades have reached their maturities or are de-cleared from OTC Clear, according to information on the HKEx website.

Keeping up with Regulatory Changes

In its latest annual report, HKMA highlighted, among other reporting functions, the transaction reporting function with regards to OTC derivatives, trade repository for supporting mandatory reporting under the existing regulatory regime in Hong Kong as having been scheduled for launch by mid-2013, just prior to the target implementation date of the regulatory regime itself.

Development of the trade repository system’s next phase was noted as commencing in 2013, with focus on including the remaining most commonly traded products in the local market, and those requested to be added by regulatory authorities subsequently, and as scheduled for completion by mid-2014, according to the 2012 annual report for HKMA.