Quick Links
In the pressNews Commentary
March 2009: The announcement of multiple competing central services for credit default markets verifies Message Automation's strategy to provide users with flexible rules-based routing for OTC Derivatives data
Message Automation's solutions for OTC Derivatives have always been designed to move with the industry. Recent announcements of new initiatives in credit default markets are a great example of why we believed significant investment in direct bi-lateral interfaces is the wrong way to approach the issues.
Following pressure from regulators on both sides of the Atlantic, a spate of new services has been proposed over the last few weeks to improve post trade processing and reduce risk. The most recent was this week’s launch by IntercontinentalExchange (ICE) of a clearing house and central counterparty for credit default swap (CDS) transactions. ICE is acquiring The Clearing Corporation to complement its own capabilities, and has already received approval from the Federal Reserve.
The ICE service will compete with Chicago Mercantile Exchange (CME), which announced it would develop a central counterparty
However, although welcomed by some, these U.S. based offerings are likely to encounter stiff competition from European championed proposals from Swiss-German Eurex and NYSE owned Euronext-LIFFE.
To add to the confusion, LCH.Clearnet is now entering the same space hoping to build on its credibility in OTC processing derived from its (primarily Rates-based) Swapclear. However, it is also currently victim of a takeover tussle between DTCC and a consortium involving several inter-dealer brokers and the LSE.
This competition and the growing trans-Atlantic divide (all this just within a single asset class) is a demonstration of why flexible routing capability for OTC data is ever more important.
As it stands, any one or more of Eurex, CME, DTCC, LCH.Clearnet, NYSE Euronext LIFFE, and ICE could succeed in dominating this market. Ensuring your internal architecture is not designed to achieve a single external end-point is therefore vital. Otherwise you may find your chosen external destination has not gained critical mass, leaving you with a great HDDVD player while the rest of the market has gone Blu-Ray!
While the landscape continues to shift, it might be easy to do nothing and wait, but retain risky manual processes for an indeterminate time. Alternatively, you can prepare now. Implementing an infrastructure which caters for whichever services win this battle, and handles all asset classes seems compelling. Message Automation provides exactly this but ensures your investment risk remains proportional.
Our proven solutions can handle sophisticated service specific, counterparty specific and/or product specific routing while rigorously enforcing data quality. If the final post trade processing picture includes more than one central counterparty or clearing service, or perhaps different providers for different asset classes, to Message Automation this is simply maintenance of configuration rules within a single coherent infrstructure.
To discuss how we can help you solve today’s problem without getting caught out tomorrow, please e-mail us at future-proof@messageautomation.com
News Links:
