Markit has launched a comprehensive service for electronic trade confirmation and exercise management for the FX options market.
The service will be deployed by its OTC derivatives trade processing service, MarkitSERV. Front and back office processes that will benefit from the service include centralised generation of legal trade confirmations; straight-through processing of exercise actions; real-time communication of exercise actions via an audited platform; and management of other lifecycle events based on a confirmed matched trade population.
Designed in coordination with Barclays, Citi, HSBC, JP Morgan, Morgan Stanley, Nomura, RBS, UBS, as well as several major buy-side institutions, including Citadel’s Global Fixed Income Fund, the service is intended to assist exercise process management for FX options as well as to provide electronic legal trade confirmation. The solution should help users become more efficient in their management of FX options trades and reduce operational risk.
Keith Tippell, managing director and head of FX processing, Markit, commented: “The FX options market needs a comprehensive, centralised solution for trade confirmation and exercise which reduces risk and improves efficiency. We have had great success in providing the industry with processing solutions in other markets such as rates and credit for over a decade, and we aim to become the venue where all participants come for FX confirmation and exercise.”
By pairing unique trade identifiers for regulatory reporting and providing a structure of clearing requirements, the service aims to make compliance with regulatory requirements for the FX market more efficient.
As James Bindler, global head of G10 Foreign Exchange at Citi commented: “Manually exercising FX options is a vestige from an earlier era of FX options trading. Automation of this process will help to reduce both uncertainty and risk in a market where volumes have grown substantially over the past years.”