Inter-dealer brokers GFI Group (GFI), ICAP, and Tullett Prebon intend to launch a common electronic check out service for over-the-counter (OTC) derivatives. The service, which can apply to trades anywhere in the world, will be operated by an arm of The Depository Trust & Clearing Corporation.
The new service will provide a single point for the integration of dealers’ trade capture systems to multiple inter-dealer brokers. It will create a single centralized hub where dealers can review, verify and affirm OTC derivative trade information, regardless of which inter-dealer broker arranged the trade. At the option of the dealer, electronically verified transactions can be automatically submitted to DTCC Deriv/SERV, resulting in legal confirmation within seconds of trade verification.
“The industry needs a truly independent mechanism for managing, transmitting and verifying important trade data, and we are pleased to provide this solution with our peers and DTCC,” said Colin Heffron, president and director of GFI. “Traders have asked us to be able to electronically check out details of derivatives transactions across multiple brokers on a single platform, so we are sure this will be well received.”
Expected to go live early in 2006, the service will initially include single name credit default swaps, as well as credit default index and tranched index products. Expansion to other OTC derivative products, such as interest rate swaps and swap options, equity options and other equity derivatives is also planned.
The founding inter-dealer brokers and DTCC intend to operate this service in a pilot mode for one year, after which they plan to have other inter-dealer brokers participate. The inter-dealer brokers intend to offer the service at no charge to their customers. DTCC will also waive any recovery of its operating costs during the pilot phase.