Markit to Deploy a Centralised Confirmation Infrastructure for FX Options

The company behind some of the leading information services in the financial industry, Markit, announced yesterday the launch of its new service for electronic trade confirmation and exercise management geared for the FX options market in a company statement. Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates' reporters have reached out to the firm to find out what triggered the move and talked to the firm’s Managing Director, Keith Tippell.

He shared that the company “has been engaged with its customers for some time and there’s been much discussion throughout the last 12 to 18 months about the need for centralised confirmation infrastructure for FX new trades and lifecycle events. Comparisons have been drawn with the process for interest rate and credit derivatives, which is centralised and has proven to be efficient in dealing with industry change.”

London-based Markit, which has recently gone public on NASDAQ, will be deploying its solution using its OTC derivatives trade processing service MarkitSERV, and will be working with a vast number of financial institutions, including Barclays, Citi, HSBC, J.P. Morgan, Morgan Stanley, Nomura, RBS, UBS and major Buy-Side Buy-Side The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim Read this Term institutions, among which, Citadel’s Global Fixed Income Fund.

When asked why the company chose to enter FX options, Mr. Tippell shared, "The firm sensed a strong desire in the industry for some market infrastructure that would allow central confirmation and subsequent lifecycle event processing on a centrally agreed and viewable record of the trade.”

He elaborated saying, “We have got to the point where the market is ready for such a service - one of the many trigger events has been the issues with regulatory reporting in Europe. We’ve started with options because they are one of the more complex FX products, and actually because of that complexity there is a higher degree of manual processing in the post-trade phase of dealing with options. For our clients this is an obvious place to start and we are putting a type of service in place which will be applicable to other FX products, notably NDFs.”

The post-trade processing solution is aiming to assist market participants in reducing operational risks through automation and allowing them to better manage their market exposure. Additionally, a central confirmation mechanism of FX options trades brings a new level of transparency to the market alongside efficient regulatory compliance.

The company has confirmed that it is planning to expand the service to provide legal confirmation for non-deliverable forwards (NDFs) which have already garnered experience on the Indian market.