State Street Global Markets, the US investment research, trading and clearing service provider, has expanded its futures commission merchant (FCM) activities to include a swaps clearing platform.
The move is designed to create an end-to-end derivatives solution that also includes servicing, custody and accounting, collateral management, valuation and risk and analytics. The firm intends to provide clients with a single source for the reporting of both clearing and processing activities.
State Street said that the broadening of its offering is a response to the Dodd-Frank Act, which aims to migrate the majority of OTC derivatives transactions onto centrally cleared trading platforms. Parties to such trades will be required to work through an FCM acting as an intermediary between clients and central counterparties. The new regulations will impose collateral and real-time reporting requirements to reduce counterparty credit risk and bolster market transparency.
The derivatives clearing solution will draw on eExchange, a division of State Street Global Markets that focuses on trading solutions for foreign exchange, futures and US treasuries, and State Street Global Services, which provides support for asset owners and managers for assets such as OTC derivatives, private equity and real estate.
“As the derivatives markets evolve, we are increasingly aware of the need for full-service clearing and other services to help clients realize the benefits of the new derivatives regime, through enhanced transparency, more open execution platforms and central clearing,” said Clifford Lewis, head of eExchange.