Investment management firm BlackRock has appointed Morgan Stanley as one of its primary clearing brokers for OTC derivatives transactions in the lead-up to central clearing of derivatives becoming mandatory in the wake of Dodd-Frank.
Morgan Stanley offers clearing for OTC and listed derivatives globally. It clears OTC derivatives for credit default swaps at ICE Clear Credit and CME Group, as well as interest rate swaps at LCH SwapClear and CME Group. The firm says it will add connectivity to additional clearing houses if client demand requires it.
Supurna VedBrat, managing director and co-head of market structure and electronic trading at BlackRock, says OTC clearing will help reduce systemic risk and counterparty exposure for clients. “We will gradually increase volumes as we move to initiate clearing across our client base, and we have been very pleased with Morgan Stanley’s partnership throughout this process.”
Although most firms have already accepted central clearing of OTC derivatives as a certainty, questions have been raised as to whether the current infrastructure can handle the volume of transactions that will be shifted to central counterparty clearing houses.
“We are proud to have been chosen by BlackRock as the clearing broker for these first trades,” says Stephen O’Connor, global head of OTC clearing at Morgan Stanley. “The move to early adoption of clearing by BlackRock and others is evidence of the heightened level of interest in OTC clearing services as our clients prepare for mandatory Dodd-Frank deadlines.
Reporting by Christopher Gohlke, Global Custodian, an Asset International publication