IHS Markit Provides Critical Infrastructure to Replace LIBOR in Derivatives Markets
- 30.07.2018 03:18 pm
MarkitSERV powers first wave of SOFR swaps trades
IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions, today announced that MarkitSERV, its trade processing service for OTC derivatives, is at the forefront of the use of new reference rates replacing LIBOR in derivatives markets.
The first wave of OTC derivatives trades using the new Secured Overnight Financing Rate (SOFR) used MarkitSERV to match, confirm and straight through process them for clearing and regulatory reporting. To date, seven major derivatives dealers have completed SOFR trades using MarkitSERV. These included both cleared and non-cleared, as well as party-to-party direct and SEF-executed trades.
“Helping our clients adopt new reference rates is a classic example of how we provide a highly reliable and efficient mechanism for the derivatives market to both innovate and respond to industry driven change,” said Claire Lobo, managing director at MarkitSERV. “As we have done for clearing, reporting and electronic trading, when we bring a new standard like SOFR onto MarkitSERV, we automatically update the market and create the bridge between new and old types of swaps, regulatory regimes and multiple forms of trade execution.”
“Goldman Sachs fully supports the advent of new reference rates and the important changes they will bring to our markets,” said Richard Chambers, global head short macro trading at Goldman Sachs. “MarkitSERV helps us and our clients operate efficiently and keep pace with rapid evolution in derivatives markets.”
Shawn Bernardo, CEO of tpSEF, which was the first SEF to complete a SOFR trade, said, “I am very excited that TPIcap were part of the first SEF executed SOFR swap transaction and that we were able to rely on the network and post trade services provided by MarkitSERV in completing the trade.”
Currently, MarkitSERV supports SOFR, SARON (Swiss Francs), SONIA (British Pounds) and TONA (Japanese Yen). For each new reference rate, MarkitSERV consults extensively with market participants to provide the standards and functionality required to reliably and efficiently confirm, clear, report and manage other trade lifecycle events using the MarkitSERV network.
“It is no surprise that the first SOFR swaps happened the week after the CFTC’s Market Risk Advisory Committee meeting addressed the transition from LIBOR on July 12,” said Salman Banaei, executive director at IHS Markit and a member of the Committee. “Cooperation among regulators, market participants and infrastructure providers like MarkitSERV was critical to the successful start for this transition.”
MarkitSERV will add other reference rates intended as successors to LIBOR, based on industry demand.
MarkitSERV is an integrated, multi asset class service for the management of trade confirmation, clearing, allocation of block trades and regulatory reporting. More than 2,500 firms use MarkitSERV to process OTC derivatives trades, connect with 18 clearinghouses worldwide and report trades in multiple jurisdictions.