The Depository Trust & Clearing Corporation (DTCC), MarkitSERV and AcadiaSoft are working to deliver a joint solution for improving communication related to setting and maintaining the collateral required between counterparties to over-the-counter (OTC) derivative transactions.
The solution is the first step taken by the three companies to develop a multi-functional collateral processing platform for the OTC derivative market.
Clients are searching for ways to streamline the multiple post-trade requirements relating to derivatives transactions and by linking AcadiaSofts technology and DTCCs capabilities to MarkitSERV, we provide our clients with a single comprehensive platform to manage collateral alongside trade processing workflow, portfolio reconciliation and valuations, says Jeff Gooch, CEO of MarkitSERV.
Through this collaboration, the three organizations say they are helping the industry fulfill commitments to bring greater transparency and reduce operational risk associated with processing bilateral collateral agreements.
Making our innovative service available to the buy side via MarkitSERV is a great milestone for AcadiaSoft, says Craig Welch, co-founder of AcadiaSoft. We anticipate that requirements for central clearing will make effective collateral management an even more critical function and we are pleased to offer our solution in conjunction with MarkitSERV and DTCC.
Beginning later in the first quarter of 2011, the MarkitSERV portal will provide clients with integrated access to the AcadiaSoft Messaging Platform, an online service that facilitates and manages communications required for collateral calls. The new service will enable buy- and sell-side counterparties to manage information electronically on exposures, commitments and adjustments to collateral and create an audit trail of all communication about margining. AcadiaSofts tools are more efficient and reliable than existing processes for communicating about collateral, which takes place primarily over telephone and email.
To the extent messages about collateral are used to satisfy collateral and related reporting requirements under the Dodd-Frank Act, they can be processed through DTCCs Trade Information Warehouse facilities and regulatory reporting interface.
This alliance leverages our organizations expertise in providing market participants with the first component required for straight-through-processing for collateral, says Peter Axilrod, managing director, DTCC derivatives services and product development. DTCC remains committed to partnering with complementary service providers to bring to market a host of automated solutions that continue to increase transparency and successively take more risk out of bilateral collateral processing and the OTC derivatives market as a whole.
The total value of collateral circulated in the OTC derivatives market was estimated at US$3.2 trillion at the end of 2009 versus US$200 billion in 1999, according to the International Swaps and Derivatives Association. Despite the significant growth in these arrangements over the past decade, processing of OTC derivatives collateral has remained predominantly manual and fragmented, raising industry and regulator concerns about the operational risks involved in these types of transactions.