Achieving Operational Efficiency in the OTC Derivatives Market

Transcription

1 ECB Global Operations Managers Conference, Frankfurt 23 rd April 2007 Achieving Operational Efficiency in the OTC Derivatives Market Stuart McClymont, Director Global Head of OTC Derivative Operations Market Initiatives

2 Contents Opportunities in achieving STP in the OTC Derivatives Market The Challenge in achieving STP in the OTC Derivatives Market The goal of the OTC Derivatives Industry Requirements for reducing Confirmation and Settlement breaks Current and future STP Solutions in the OTC Derivatives Market 1

3 Opportunities in achieving STP in the OTC Derivatives Market TRADE EXECUTION TRADE CAPTURE Sales / Trading System e-trading Platforms Brokers Voice : checking trades out on Trade Date to ensure they match those verbally executed obtaining Fund Allocation information obtaining Tri Party consent on Assignments Dealer B Sales / Trading Sales / Trading System 1. TRADE FEEDS Trade Repository DOCUMENTATION Confirming trade details Between s and Dealers (Electronic Messages) 2. No assurance Cpty has received the paper fax nor where it sits in their workflow (Paper Confirms) 3. SETTLEMENTS Cash System confirming and settling Cash (Periodic / Coupon) between s and Dealers Cash System 4. COLLATERAL confirming and settling collateral and margining between s and Dealers 5. CLIENT SERVICE AND VALUATIONS Valuations advice, content and provision of Valuations between s and Dealers Valuations 6. 2

4 The Challenge in achieving STP in the OTC Derivatives Market We face an environment with: multiple institutions multiple processes multiple vendors insufficient inter operability between institutions, processes and vendors e- ECN e-bank End of Day Portfolio Reconciliation Portfolio Management Broker Middleware Static Data Legal Affirmation Valuation Confirmation / Dispatch Confirmation Matching Cashflow Matching Settlement Counterparty Margining 3

5 The goal of the OTC Derivatives Industry The OTC Derivatives Industry needs to fundamentally change the way it supports and processes transactions by inverting and automating the support pyramid: T0 Executed Trade Executed Trade and Matched with Cpty Middle Office Documentation T n Middle Office Documentation This not only provides support efficiencies but mitigates risk earlier in the life cycle of a transaction. 4

6 Requirements for reducing Confirmation and Settlement breaks Trade Date agreement of Trade Details More efficient use of Trade Execution Platforms to increase accuracy and speed of confirmations More efficient provision of Fund Allocations More efficient use of the Request for and Provision of Consent to drive the confirmation of Assignments Faster roll out of additional Asset Classes onto Electronic Confirmation platforms Continued identification of common breaks and process changes to eliminate reoccurrence 5

7 Current and Future STP Solutions in the OTC Derivatives Market Note : not complete - for illustrative purposes only ICAP iswap Creditex Bloomberg Autobahn Fi+ Market Axess Trade Web ICAP GFI Prebon TRADE EXECUTION ECN VOICE Dealer B CLIENT 1. TRADE CAPTURE Swapswire API Dealer B TRADE CHECKOUT TRADE FEEDS System Trade Repository API T-Zero DTCC Communicator API / Manual DOCUMENTATION SETTLEMENTS Cash System Cash LCH Cpty DTCC TIW Electronic Cash Cash Cash System 4. COLLATERAL Coll. TBD Coll. 5. CLIENT SERVICE AND VALUATIONS Valuations 6 Cpty TBD Valuations TBD Val. Valuations 6.