Financial information services vendor Markit is hoping to make the manual exercise of foreign exchange (FX) options a thing of the past. Markit officials are developing an electronic service for trade confirmation and exercise management of FX options, according to a company statement.
The new service, which will be deployed by MarkitServ, Markit’s trade processing service for over-the-counter (OTC) derivatives, is being developed by Markit in partnership with several of the world’s largest banks and buy-side institutions, including Barclays, Citi, JPMorgan, Nomura and Citadel’s global fixed income fund, among others, according to the statement.
When contacted, representatives of Markit say they are unable to give a concrete time-frame for the platform’s release. “We are working with the industry to define an appropriate program plan and rollout period,” according to a spokeswoman for the vendor.
When it is finished, the new service should improve processes like centralized generation of legal trade confirmations, straight-through-processing of exercise actions, real-time communication of exercise actions via an audited platform and management of other lifecycle events based on a confirmed matched trade population, according to Markit.
“Manually exercising FX options is a vestige from an earlier era of FX options trading,” says James Bindler, global head of G10 foreign exchange at Citi in a prepared statement. “Automation of this process will help to reduce both uncertainty and risk in a market where volumes have grown substantially over the years.”
The new service also intends to make it more efficient for participants in the FX market to comply with regulatory reporting and clearing requirements, officials say. Markit officials add that they intend to expand the service to provide legal confirmation for non-deliverable forwards.
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