Interest Rates Archives - Page 2 of 6

CDOR countdown: OSTTRA powers through 300,000 trades in major benchmark shift

LONDON 26 June 2024 – OSTTRA, a global post-trade solutions provider, has processed over 300,000 cleared Canadian Dollar Offered Rate (CDOR) trades through CCP Sync on its MarkitWire platform for more than 60 customers over the past month, as the industry moves towards finalising the transition to Canadian Overnight Repo Rate Average (CORRA) on 28 June.

The Canadian Dollar Offered Rate (CDOR) is the latest legacy benchmark rate, commonly referred to as the IBORs (Interbank Offer Rates), being replaced with new alternative transaction-based benchmark interest rates in the majority of regions across the globe. Transitioning these benchmarks affects a significant portion of the swaps market and OSTTRA customers. Interest rate swaps use benchmarks like LIBOR or its replacements (such as CORRA) to determine floating rate payments.

CCP Sync supports the transition events and allows OSTTRA MarkitWire to capture the results of any post clearing activity, including compression, from multiple CCPs, delivering the results to customers in a consistent format via existing connectivity.

Melissa Younger, Head of Rates & Credit Trade Processing at OSTTRA, added: “Our ability to process such a high volume of CAD trades successfully highlights our commitment to facilitating a smooth transition for our customers, who value our expertise and partnership. Comprehensive support, consistent processing across multiple CCPs and innovative solutions are key to ensuring the industry continues to adjust smoothly to new benchmark rates.”

OSTTRA triReduce compressed USD 684billion in the new benchmark during the week following the LCH transition event.

The market will turn its attention to the Mexican TIIE and Euroyen TIBOR in Q4. In the run up to these events, OSTTRA will provide customers with testing that mirrors live infrastructure, alongside technical support to ensure readiness for the dress rehearsals that run in advance of live events with multiple CCPs. As customers seek to reduce their exposure to legacy benchmarks, OSTTRA triReduce has already completed a record H1 in MXN at CME with USD 1.4 trillion compressed and more cycles scheduled.

To find out more, talk to a member of our team at at info@osttra.com.

OSTTRA MarkitWire for the Inter-Dealer Broker (IDB) and Trading Venue Community

OSTTRA MarkitWire is a cornerstone of the over-the-counter (OTC) derivatives market providing comprehensive trade processing and workflow solutions.

With a strong focus on automation and standardisation, the platform supports trade submission, affirmation, confirmation and clearing connectivity for more than 65 electronic brokers and regulated venues.

It offers a market-leading industry solution for the inter-dealer broker (IDB) and trading venue community – streamlining post-trade processes, reducing operational risk and improving efficiency.

Highlights:

Broad asset class coverage: Supports a wide range of OTC derivative products, across interest rates, credit and equity
Standardised workflows:
- Brokerage fee agreement workflow (46 currencies)
- Dealer to dealer (D2D) flows
- Dealer to client (D2C) flows

Connectivity:
- Provides seamless connectivity to 12 central clearing counterparties (CCPs)
- Trade submissions across 8 venue types with multi jurisdiction reporting

Extensive network:
- An active customer network of 260+ dealers and 1,600 end users
- End-to-End Solutions: Offers a complete suite of post-trade services, from trade affirmation and confirmation to clearing and regulatory reporting

Additional Features

Auto processing (direct automatic STP to clearing)
Dispute resolution
Anonymous trade functionality
Package trade clearing
Bunched order for participating clients
Package identifier fields
Clearing and compliance reports
Introducing broker workflow

For more information contact info@osttra.com or complete the form below.

OSTTRA Launches New Service for Cross-Currency Swap (CCS) Conversion From LIBOR to Risk-Free Rates

LONDON, 07 June 2023 – OSTTRA, the global post-trade solutions company, today announced it has successfully delivered the first cross-currency swap conversions of USD/SGD swaps from SOR to SORA. The service will expand to cover other indices subject to cessation in the coming months.

OSTTRA has been working with the industry since 2021 to enable market participants to overcome the complex challenge of transitioning from legacy Libor benchmarks to new risk-free rates (RFRs). The latest service, an industry first, facilitates the multilateral conversion of uncleared cross-currency swaps away from legacy benchmarks to alternative risk-free rates (RFR).

The conversion process generates overlay transactions, in the form of market standard interest rate swaps and overnight index swaps, which are submitted to clearing, minimising the risk and present value (PV) impact. Any remaining PV impact from the overlay trades is settled in cash between the participants of the conversion run, making the process market risk neutral.

The first multilateral conversion, for USD/SGD swaps, was completed by eleven market participants, whilst a second conversion was performed by twenty-one participants ahead of CCP conversion for the SGD SOR benchmark. The service is also available to customers with legacy benchmark exposure in cross-currency swaps referencing other indices subject to cessation, including those in MXN, PLN, ZAR and CAD.

The new conversion service is delivered by OSTTRA triReduce and triBalance, while connectivity to CCPs for the overlay swaps is provided via OSTTRA MarkitWire. The process has been carefully coordinated with a highly engaged group of market participants.

“As one of the largest market makers in SGD derivatives, DBS is actively working with OSTTRA to convert its bilateral SOR cross currency swaps into SORA in preparation for a smooth industry transition to SORA. Through close collaboration with key industry players, an innovative solution was developed to reduce legacy SOR positions in the industry in line with regulatory requirements.”

– Andrew Ng, Group Head, Treasury & Markets, DBS Bank

“OCBC Bank is proud to have participated in the inaugural CCS conversion in the SGD rate derivative market. We remain committed to working with the industry and our clients towards the transitioning of SOR to SORA, and the overall development of Singapore as a key financial centre.”

– Kenneth Lai, Head, Global Treasury, OCBC Bank

“UOB has been actively working with OSTTRA and is pleased to have participated in the Bilateral USD/SGD Cross-Currency Swaps conversion from SOR to SORA. This partnership paves the way for a smooth IBOR transition for SOR/SORA. We are very encouraged by this collaboration and look forward to working closely with the industry participants and OSTTRA in the future development of the SGD derivatives markets.”

– Leslie Foo, Group Head, Global Markets, UOB

“Our engagement with the industry over the last two years highlighted that market participants are committed to finding innovative solutions to reduce their exposure to legacy benchmarks. We are pleased to provide our non-cleared conversion service to help market participants overcome the technological and operational challenges of implementing fallback procedures and waiting until the deadlines for the respective legacy rates.”

– Vikash Rughani, Business manager at OSTTRA triReduce and triBalance

Find more information on how OSTTRA is supporting benchmark reform here.

From Rusty Bikes to Formula One: Upgrading Cash Flow Management in Derivatives Trading

Traditionally, the back office has lagged behind the front office in technological advancements, hindering efficiency and accuracy in cash flow management. It’s time to shift gears and unleash the full potential of automation, regardless of asset class or payment type.

In December 2024, Philippe Lintern, the head of the Bank of England’s FX division, compared front office staff using the most advanced technology to Formula One teams, while noting that peers in the back office were left struggling to match the pace on their “rusty old bicycles.” An area where this rings particularly true is the $667 trillion global derivatives space, where cash flow management remains heavily manual, relying on humans, emails and even fax machines, despite the fast-paced world of trading pushing ever increasing volumes through this strained back office infrastructure.

It doesn’t have to be like this. As the dust settles from the all-consuming rush to T+1 settlement, resources can be re-focused on tackling some of the stubborn pockets of manual process that persist in the back office – and with the twin goals of improving both operational and capital efficiency, cash flow management is emerging as a priority.

“Last year we started to see a lot more focus on transparency and automation in post-trade interactions between counterparties, including those processes where custodians are involved, such as cash flow payments,” said Tom Woolfenden, Director, Product Design, OSTTRA. “However, so much manual coordination remains to agree and settle these cash flows.” This has been highlighted recently by the Financial Markets Standards Board in their final standard for sharing of Settlement Instructions, and updated guidance also issued in the Global Foreign Exchange Committee’s revised FX Global Code, such as Principle 44, which states that “Market Participants are encouraged to implement straight-through automatic transmission of trade data from their front office systems to their operations systems”, by means of secure interfaces where the transmitted trade data cannot be changed or deleted during transmission.

Cash flow management itself isn’t a complicated concept: At its core, it’s about making regular payments to the other parties involved in your trades, based on the underlying contract terms and up-to-date valuations.

However, things get incredibly complex when you consider the scale of the market. A large financial institution might handle hundreds of thousands of these trades and their associated cash flows every month. This volume alone makes it difficult to track who owes what to whom. The problem is compounded by the fact that different participants use different data standards, calculation methods, market data sources, and messaging formats. This lack of standardisation can make it extremely challenging to even figure out which specific trade back-office staff are discussing in their emails, or which trade is causing a discrepancy.

“An absolute worst-case scenario is that you’re expecting to receive a cash flow from an open trade, and you have your designs on how to use that money, but your counterparty doesn’t even have an idea that there is an obligation to you”, Woolfenden adds.

Interest rate swaps, equity swaps and portfolio swaps are prime examples of the products where manual cash flow management leads to errors and operational inefficiencies. Take equity swaps for example: Cash flow management for these contracts involves the ongoing payments of the swap for the duration of the trade, as well as the underlying dividends and accruals, all of which need to be calculated, agreed on and then settled, which is where the uncertainty and misalignment comes in.

“We often see market participants taking agreed cash flow information offline, emailing, or even faxing it to their custodian, creating an inefficient communications chain to complete the payment and settlement process,” Woolfenden said.

As settlement times are expected to continue to shorten globally, untangling the confusion will quickly become even more important. Cash flow inefficiencies also prevent liquidity optimisation, or the ability of the front office to deploy cash to generate profits – because the money is stuck in a back-office limbo until the disagreement is resolved.

The most efficient way to resolve this conundrum is bringing transparency into the process for all sides and linking agreed trades with subsequent cash flows so that calculations can be made using consistent economics. OSTTRA Cash Flow Management is an established platform that helps streamline the cash-flow-processing challenge with a standard workflow and matching engine. With legal confirmations for many bilateral OTC trades readily available on OSTTRA MarkitWire and connected to the OSTTRA triResolve reconciliation engine, participants can have complete confidence that they share a common view of a transaction with their counterparties. An automated system that matches cash flows, as well as linking the underlying trades associated with them, removes the need to spend time figuring out who owes what and why: OSTTRA Cash Flow Management also notifies participants if they’re misaligned. It can also bilaterally net matched cash flows into an agreed, reduced number of payments whilst respecting settlement instructions.

“At OSTTRA, we are uniquely positioned to eliminate friction and inaccuracies in derivatives cash flows, thanks to our position at the centre of post-trade, from trade confirmation and processing through to portfolio reconciliation and collateral management, and all the opportunities for improving data standardisation that this brings. The end result is that we can seamlessly automate the entire process, including sending SWIFT settlement messages on behalf of our clients. The settling bank, typically the custodian, can receive an instruction to do the settlement just one minute after the cash flow is matched, removing the all too common merry-go-round of email, phone and fax communication and bringing greater transparency on a real-time basis,” Woolfenden said.

Once the whole lifecycle is automated, conducted in real-time and in a way that’s transparent to parties, calculations can be done on the same basis, payments can be netted and settlement becomes a matter of a simple instruction to the custodian – as easy as riding a bike! To learn more about OSTTRA for Cash Flow Management, please visit osttra.com/cashflow

Beyond DORA: Building a Foundation for Lasting Operational Resilience in Post-Trade

The DORA deadline on the 17th of January 2025 is a critical milestone for financial firms operating in the EU. But achieving true operational resilience goes beyond headline risks like cyber risk and checking boxes for compliance. It requires a proactive and holistic approach that anticipates and mitigates a wide range of potential disruptions.

In this video, OSTTRA experts go beyond the immediate demands of DORA to explore the broader landscape of post-trade operational resilience. They discuss:

Strategies for building a resilient foundation that extends beyond compliance.
The importance of a holistic approach that encompasses all aspects of your operations.
How AI and machine learning can enhance operational resilience.

ISDA’s 2021 Definitions Hit Key Adoption Landmark

ISDA and post-trade services provider OSTTRA have announced that the interest rate derivatives market has overwhelmingly transitioned to the 2021 ISDA Interest Rate Derivatives Definitions, hitting a key adoption landmark six months after implementation.

All major central counterparties incorporated the new definitions into their rule books in the last quarter of 2021, meaning all legacy and new cleared trades reference the 2021 Definitions, accounting for approximately 75% of the total interest rate derivatives market. Latest figures from OSTTRA’s MarkitWire platform show that 68% of non-cleared interdealer and 65% of non-cleared client interest rate derivatives electronically confirmed on the platform also now reference the new definitions…

To continue reading click here, or contact us at info@osttra.com.

Compression service by OSTTRA unlocks additional compression potential for G-SIBs

LONDON, 2 November 2022 – OSTTRA, the global post-trade solutions company, today announced that its market-leading portfolio compression service, OSTTRA triReduce, has compressed $26.4 trillion of interest rate derivatives in September as Global Systemically Important Banks (G-SIBS) look to reduce notionals before year-end.

More than $1 trillion in additional notional was compressed in September as a result of OSTTRA triReduce’s innovative trade refactoring solution. The patented solution, currently implemented by four financial institutions, transforms swaps portfolios to efficiently minimise gross notional exposures. Previously, market participants would experience a build-up of historic trades lacking the necessary offsets to unlock compression. Trade refactoring opens the historic population of trades, which can lead to a lower steady state of gross notional. This method has delivered an increase of nearly a third (30%) in gross notional compressed for market participants vs September last year.

“Being classified as a G-SIB is a fundamental component of financial institutions’ overall regulatory capital. It is key for banks to have a detailed understanding of their G-SIB scores, particularly as classification is assessed relative to their peers,” said Magnus Jonsson, head of business management triReduce and triBalance, at OSTTRA. “The challenge is that G-SIB assessments are highly sensitive to gross notional of derivatives contracts. This is why we are seeing such a big uptick in market participants looking to significantly reduce their notionals before the year closes. We’re happy to see our latest innovation being adopted by more participants and the significant increase they are seeing in results, and we continue to innovate to support current and future market participants in maximising their notional compression.”

For more information please click here or email us on info@osttra.com.

OSTTRA Streamlines Trade Reconciliation with Connectivity Between MarkitWire and triResolve

NEW YORK, LONDON, 6 July 2022 – OSTTRA, the global post-trade solutions company, today announced new connectivity between two of its post-trade services – MarkitWire, the leading electronic trade confirmation and processing platform and triResolve, the market leader for portfolio reconciliation, collateral management and reporting reconciliation.

Through this enhancement, trades confirmed by MarkitWire can be seamlessly delivered directly into triResolve, across a common network of more than 2,000 firms. This will drive standardisation of data for reconciliation, bringing improved efficiency, cost reduction and greater transparency between counterparties.

The direct connectivity is live with nine existing customers, covering interest rate derivatives and equity derivatives. It will also include repo transactions following the go-live of OSTTRA Trade Processing for Repos in Q3.

The lack of data standardisation through the post trade lifecycle is a persistent problem in the OTC industry, increasing operational cost and complexity. This is a challenge OSTTRA is well equipped to address.

OSTTRA was formed in 2021 through the combination of MarkitServ, Traiana, TriOptima and Reset, four businesses that have been at the heart of post-trade evolution and innovation for more than 20 years. The launch of this link reflects OSTTRA’s ongoing commitment to build upon its global network to streamline and standardise post-trade workflows across a broad range of asset classes.

The enhanced workflow leverages the MarkitWire trade ID to link the full MarkitWire FpML trade representation with the existing data in triResolve for customers who opt to switch on the new link. This information allows users to quickly remediate trade breaks identified by triResolve, making portfolio reconciliation a more efficient process.

The connection will bring operational alignment between MarkitWire users and collateral and reconciliation teams using triResolve, with minimal input needed and no additional cost to reap the benefits.

Peter Altero Jr, Head of Rates Business Development at OSTTRA, added: “The connectivity between MarkitWire and triResolve shows that OSTTRA is focused on accelerating innovation in post-trade. Our clients will only have to flick a switch on the MarkitWire side to see the significant benefits of enhanced data in triResolve. This is just the beginning. There is so much more efficiency to be gained up and down the post trade stack by having access to enhanced, standardised transactional data. Watch this space”.

Sheila Schofield, Head of triResolve Business Management EMEA, concluded: “Data from MarkitWire acts as a gold copy for the majority of OTC derivative transactions. For our clients, seamlessly incorporating this data in portfolio reconciliations will result in improved efficiency with minimal effort and no extra cost, enabling them to focus on their value-add tasks.”

From Faxes to Fintech: OSTTRA MarkitWire – Reflecting on 20+ years of industry evolution

The financial markets have undergone a dramatic transformation in the past two decades, and OSTTRA MarkitWire has been at the forefront of this evolution. From its origins replacing fax-based confirmations to its current role as a leading fintech platform, OSTTRA MarkitWire has helped shape the post-trade landscape and actively participated in the evolution.

Momentous change in financial markets

Looking back, the sheer magnitude of change is striking. Gone are the days of cumbersome manual processes, when boxes of derivative confirmations were couriered to counterparties to agree trades, or trade records were faxed over archaic technologies. Today’s seamless electronic post-trade processes have come a long way, driven in part by new technology but also by market events. And while not all those events have been anticipated or welcome, the challenges they presented have spurred innovation and ultimately benefited the entire industry. The ramifications of the global financial crisis have shaped much of today’s over-the-counter (or OTC) derivative trade workflows. Legislation has been passed and successfully rolled out across market jurisdictions.

Reflecting on the past twenty years, we feel it’s essential to pause and appreciate the industry’s remarkable evolution and accomplishments, and the role OSTTRA MarkitWire has played. But the journey doesn’t end here. OSTTRA remains committed to partnering with clients to navigate the challenges and opportunities that lie ahead. Synergies across the OSTTRA business mean clients will have single streamlined workflows across large data sets; a marked difference to a past world of siloed interactions.

20 years of evolution

The story of post-trade processing is a journey of evolution, driven by technology vendors but guided by financial institutions. In the early days of SwapsWire, the original name for OSTTRA MarkitWire, the focus was on building a platform that could connect counterparties for electronic trade confirmation in the interest rate derivatives market and then quickly progressed to support clearing. This marked a significant step forward from the manual processes that dominated the industry.

Since then, the service has evolved into a comprehensive platform driven by straight-through processing (STP), significantly reducing operational risk by minimising human intervention. Today it comfortably processes tens of millions of trade records yearly, supporting rates, credit, equity, and repo transactions across 34 currencies and various product sub-types, with connectivity to 12 CCPs and multiple venues supporting 8 venue types. Building on this success, OSTTRA MarkitWire is transforming the bilateral repo market with our standardised, automated affirmation and confirmation workflows, while working with our customers to prepare for the incoming clearing mandates in the United States.
Furthermore, OSTTRA Trade Manager interacts seamlessly with OSTTRA MarkitWire providing investment managers and fund administrators with a consolidated matching and confirmation workflow across asset classes.

OSTTRA MarkitWire has a proven track record of supporting the industry through periods of significant change and uncertainty. When the Lehman Brothers crisis emerged in 2008, we worked with our clients and clearing houses to assist in an orderly transition of portfolios. The partnership has continued through the rollout of clearing best practices and mandates worldwide with OSTTRA MarkitWire connectivity extended to relevant CCPs, not only for clearing but also for post-clearing events, including the cleared trade IBOR transitions. The service now includes CLS settlement and connectivity to trade repositories for regulatory reporting.

In this era of complex and intense regulatory debate, OSTTRA has remained a steadfast partner, providing clients and partners with automated, digitised solutions, helping to manage the cost and complexity of change.

Consensus building – the keystone for centralised adoption

One of the most important roles a scaled technology provider can play is to act as a forum for rational industry-wide decision making. The industry expresses its mutual needs, and we provide intelligence, expertise and insight on how workflows can evolve to satisfy new regulations efficiently.

Market participants can struggle to collaborate and find cost-effective solutions to benefit the industry without setting off legal alarm bells. We have provided a safe forum for discussion since the initial launch with a member group of 23 businesses interested in standardising inter-dealer messaging in the rates market. Today we engage with a network of over 1,600 active participants across multiple working groups and the network continues to grow, particularly in emerging markets where the demand for market infrastructure increases.

With our partners we have taken the industry on a journey, drawing on new technologies and techniques as they have become available. That journey is not stopping now; on the contrary, OSTTRA marks a shift into a new gear, with the promise of compelling and synchronised benefits to our customers.

Marrying ‘T0’ and ‘T+’ post-trade processes

As OSTTRA, we have aligned our services to enable frictionless workflow for confirmation and reconciliation processes. Our full legal confirmation remains the key cog in our credit, rates and equity businesses – providing a golden source of agreed electronic derivative contract information to market counterparties, and creating a point of agreement and standardisation that enables trust.

Using this record in downstream T+1 activities lowers the resource burden for operational teams managing increasing volumes and system complexities. In today’s environment of ever-increasing regulatory scrutiny, banks must conduct assorted reconciliations across their technology infrastructures to ensure data accuracy and compliance. This includes reconciling data between their own global business units, between counterparties, with clearing houses and also the data they report to trade repositories.

Given OSTTRA’s interconnected post-trade services and 20 year track record, we are uniquely positioned to assist the industry in navigating these processes. This is our bread and butter. Increasing STP, harnessing the power of data, enabling synchronised analytical processes and allowing customers to optimise their resources most appropriately aligns with our vision and track record of marrying post-trade processes for the benefit of the industry.

In delivering for our clients i.e., by connecting OSTTRA MarkitWire and our portfolio reconciliation service, OSTTRA triResolve, we endeavour to add further use cases that bridge the synergies within OSTTRA. Future cases will span different asset classes and platforms, amplifying the resource optimisation benefits our customers are continually searching for and removing redundant processes for good.

Partnering with the industry through Interest Rates reform and transition

Financial market professionals will be well-versed with the global introduction of overnight risk-free rates (RFRs), replacing legacy interbank offered rates (IBORs), across multiple markets and currencies. For over 20 years the legacy OSTTRA businesses have helped navigate industry change like central clearing, regulatory reporting, compliance timeliness, and disclosure of material economic terms (METs). Benchmark reform is no different.

OSTTRA MarkitWire’s CCP Sync services for Rates initially focused on netting, compression, and portfolio transfers. By listening to multiple CCP updates and absorbing trade messages back into customer systems via existing APIs, we enabled advantageous STP workflow and mitigated the need for customers to build additional post-trade connectivity. As clearing continues to evolve across various jurisdictions, this connectivity remains as important as ever.

Enter benchmark reform through clearing events – the process of running high-risk, multi-year projects of transitioning millions of trades from IBOR rates to new RFRs. Using our CCP Sync service, hundreds of customers have avoided expensive ‘blue ocean’ builds and instead utilised the OSTTRA MarkitWire connectivity to multiple CCPs and coverage of key market currencies, to achieve transitions in an automated manner. We partnered with the industry through the initial IBOR transitions in 2021 and the notable USD Libor transition events in 2023 – the work continues today.

As various markets and regulators continue to review and update legacy rates – most recently Canada, and looking ahead to Mexico, Japan and Israel – rest assured the OSTTRA team is on-hand to deliver exceptional CCP Sync services that reduce cost and risk through low latency and resilient frameworks. We have no doubt legacy rates will remain in certain markets, and that’s OK; our aim is to partner with the industry across their broader portfolios of trades, be they cleared or non-cleared, and when the time is right, we’ll be there to support rates transition activity.

It’s not about the destination, it’s about our journey together

So the question is, where does the industry go from here? With a backdrop of exciting new technologies such as distributed ledger and artificial intelligence (AI), our experts are naturally following these developments and applying innovative and incremental changes to our products, for example, OSTTRA Trade Manager’s Paper Digitisation module. We view these changes as natural improvements to the existing products that have served the industry so well.

Most importantly, we look to our clients to shape our functionality roadmap. Their input may be driven by technology, the pursuit of greater operational efficiency, or challenges arising from new ideas or regulatory and compliance needs. Whatever the use case, we are committed to working collaboratively with the industry. We are not in the business of advocating shiny new technologies for their own sake, our philosophy is to advance the needs of the industry, building on 20 years of connectivity, evolution, resilience, partnership and transparency.

Two decades of experience have prepared us for the next chapter of post-trade. We’re embracing the challenge and the technology, collaborating with our clients to build a future defined by efficiency, innovation, and connectivity. The future is post-trade, and it starts now.

For more information, contact info@osttra.com