Markit deploys electronic trade confirmation service for FX options

Financial information and technology provider Markit has today announced that it has launched a new service for electronic trade confirmation and exercise management for the FX options sector, which the firm will deploy via its trade processing service for OTC derivatives, MarkitSERV.

Backed by several of the world’s largest FX dealers including Barclays, Citi, HSBC, JP Morgan, Morgan Stanley, Nomura, RBS and UBS as well as a series of buy-side institutions, one of which is Citadel’s Global Fixed Income Fund, Markit considers that this post trade solution will help participants reduce operational risk and become more efficient in their management of FX options trades.

The new service will improve front and back office processes such as the inclusion of centralised generation of legal trade confirmations, straight-through-processing (STP) of exercise actions, realtime communication of exercise actions via an audited platform, and management of other lifecycle events based on a confirmed matched trade population.

James Bindler, global head of G10 foreign exchange at Citi, made a corporate statement that “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.”

Keith Tippell, managing director and head of FX processing at Markit, added “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.”

According to Markit, central confirmation of FX trades makes it more efficient for the FX market to comply with regulatory requirements, such as pairing unique trade identifiers for regulatory reporting, and provides a foundation for compliance with future FX regulation, such as requirements for clearing.

Markit intends to expand the service to provide legal confirmation for non deliverable forwards (NDFs).  Doing so will complement its existing MarkitSERV clearing middleware service for NDFs.

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