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Foreign Exchange

Thomson Reuters, EBS sign up to Traiana’s CCP Connect

Thomson Reuters and EBS have signed agreements to use Traiana’s client clearing solution Harmony CCP Connect, which follows a move by several leading FX banks earlier this year to use the service to reduce client-trading costs.

The decision by the two leading interdealer FX brokers effectively means that the companies are one step closer to becoming designated as swaps execution facilities (SEFs) under incoming new US financial markets regulations for trading derivatives within the Dodd-Frank Act, says Traiana chief marketing officer Nick Solinger.

“Thomson Reuters and EBS will likely register to become SEFs, and under Dodd-Frank they are obligated to have connectivity to one or more clearing houses,” says Solinger. “Linking with Traiana for CCP connectivity is driven both by client demands for EBS and Reuters to provide connectivity to clearing houses, but also by a requirement to comply with the regulations.”

In March, Bank of America Merrill Lynch, Citi, Deutsche Bank, JPMorgan, Morgan Stanley and UBS said they would begin using CCP Connect to manage workflow required to clear over-the-counter (OTC) FX derivatives. This enables them to manage the clearing process with their clients, counterparties and clearing houses.

The product is seen as the solution to reduce clients’ costs of complying to new FX derivatives regulations. In the first instance, this will involve the clearing of non-deliverable forwards. The post-trade services group is set to sign more banks up to its client-clearing-solution facility within the next month.

While Traiana Harmony CCP’s services are not specifically regulated by Commodity Futures Trading Commission rules under Dodd-Frank, the platform is acting as a third-party technology agent under the act, says Solinger.

The EBS and Thomson Reuters connectivity to CCP Connect gives market participants access to all clearing houses registered to clear OTC FX trades, and provides counterparties with an additional degree of confirmation and verification of each trade by notifying them when the trade is sent to the clearing house through Traiana’s systems.

The CCP Connect business is being pitched as a service whereby market participants can reconcile between the new regulations in the US being slightly different from regulations in Europe, and different again in Asia. Additionally, its platform will help the banks manage the increasing array of clearing houses and trade repositories entering the market, not to mention the different requirements across various client segments.

“We act as a routing layer in the market to make sure each trade gets to the right place and the right things happen to it,” says Solinger.

While counterparties will remain responsible for executing trades and posting collateral to the clearing houses, Traiana will focus on the real-time processing of the trades to the clearing house, as well monitoring whether or not a client is trading within their available collateral.

“Enforcing those limits on your client is an important part of Dodd-Frank and our CreditLink product is a key element of our product suite integrated to Harmony CCP Connect that enforces limits both pre-trade as well as post-trade during the trading and clearing process.”

EBS and Thomson Reuters are already linked to Harmony CreditLink. Last week, the CreditLink service was connected to CME and NYSE Liffe for exchange-traded derivatives.

Thomson Reuters’ global head of treasury Jas Singh says his company’s trading platform link with Traina Harmony CCP is demonstrative of the OTC FX market’s awareness that workflows around the trading of the products are set to change under the new EU and US regulations.

“By connecting to Harmony CCP Connect, our clients will have seamless access to the FX clearing organizations, and the ability to better manage their bilateral exposures and their counterparty risk,” says Singh.

EBS CEO Gil Mandelzis, who co-founded Traiana, adds that CCP Connect is the most versatile clearing house connectivity system for EBS.

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