In other FinTech news briefs, IHS Markit is taking on MiFID II unbundling and vendor TS is working with OTAS.
FICC Targets Risk Reduction & Capital Relief
Murray Pozmanter, DTCC managing director, head of clearing agency services
The Fixed Income Clearing Corp. (FICC), a DTCC subsidiary, has launched a repo clearing offering, the Centrally Cleared Institutional Tri-Party (CCIT) Service, that is intended to provide risk reduction and potentially capital relief, officials say.
In fact, hedge fund giant Citadel and investment bank Morgan Stanley have already used the CCIT system, according to the DTCC.
“We are very pleased to have been able to work with Citadel and Morgan Stanley to take this next step to make CCIT a reality,” says Murray Pozmanter, DTCC managing director and head of clearing agency services.
Since the SEC approved rule changes last month, the FICC has been working with dealers and cash lenders such as corporations, asset managers, insurance companies, sovereign wealth funds, pension funds, municipalities and state treasuries to prepare the documentation and agreements “to begin this next stage in the evolution of the repo market,” officials say.
The rule changes allow institutional investors to participate directly in the clearinghouse through CCIT membership, which “expands the availability of central clearing in the repo market and extends central counterparty (CCP) services,” according to the FICC. Membership also serves as a guaranty of the completion of eligible tri-party repo transactions between dealer members and eligible institutional cash lenders.
The goal of expanding the CCP guaranty to more participants is intended to lower the risk of diminished liquidity in the tri-party repo market “caused by a large scale exit of participants in a market stress situation,” FICC officials say.
In addition, expanded membership will mean that “more trading activity with a failed counterparty can be centrally liquidated in an orderly manner” via the FICC. This could reduce the risk of “fire sales” that drive down asset prices and spread stress across financial, officials add.
IHS Markit Launches RPA Solution for MiFID II Unbundling
IHS Markit, a data and analytics solutions vendor, is launching RPA Manager, a service targeting asset managers who need to sort out the unbundling of investment research required by MiFID II.
MiFID II requires asset managers to separate payments for research from trading commissions that are due to the brokers supplying research.
If asset managers use clients’ assets to fund research payments, the asset managers “must disclose research fees, allocate those fairly among client accounts, and receive client approval for research expenses,” officials say. Payments must come from segregated research payment accounts (RPAs) that have been created by the asset manager.
The new RPA Manager offering includes an online toolset to help firms meet MiFID II requirements such as research budget calculations, tracking and allocation, managing funding of the RPA through direct debit or commission sharing agreements, reconciliation, reporting and document management, officials say.
In addition, the solution will integrate with the SWIFT network to help firms manage payments through a single interface for sending payment instructions to and receiving activity notices from the bank of their choice, officials add.
“Unlike other major regulations in capital markets, which have largely impacted sell-side institutions, MiFID II imposes significant burdens on asset managers,” says Michael Aldridge, managing director at IHS Markit, in a prepared statement.
Integration is possible between RPA Manager and other IHS Markit brokerage and research services tools, officials say. The new offering also integrates with research management services from IHS Markit such as Broker Vote and Commission Manager, “to provide a holistic research, commission and payment management solution,” officials add.
“We are actively collaborating with customers on the design and implementation of a holistic workflow solution that will bridge our multiple services to help fund managers administer newly regulated activity, such as managing commissions and tracking and evaluating research,” says Tom Conigliaro, managing director at IHS Markit, in a statement.
For the near future, IHS Markit plans to offer a service that “can perform due diligence, governance and reconciliation activity” on behalf of asset managers seeking to outsource the administration of RPAs, officials say.
TS Integrates OTAS Analytics
TS, formerly TradingScreen, has integrated OTAS Analytics from OTAS Technologies into TradeSmart, a multi-asset OEMS platform, officials say.
TS clients will have access to real-time analytics and market intelligence from OTAS for pre- and post-trade best execution requirements, officials say.
OTAS Trading Analytics offers real-time alerts, standard TCA metrics, a breakdown of market conditions and dynamic alerts allowing orders to adjust according to changing circumstances, officials say.
The TS-OTAS integration is the latest addition to the TS Partner Program, set up to expand TS client offerings and to meet the needs of the buy-side community. OTAS is a Liquidnet company and specialist provider of market analytics, officials say.
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