Swift hooks up with CCPs
22 September 2010 London
Image: Shutterstock
SWIFT, the financial messaging provider for more than 9,000 financial institutions and corporations in 209 countries, announced today that it has launched an initiative linking its global central trade matching solution for equities and fixed income trades, Accord for Securities, to multiple central clearing counterparties (CCPs). EuroCCP, SIX x-clear and LCH.Clearnet Ltd are the first CCPs to sign up with SWIFT and will enable a direct connection between SWIFT Accord and their clearing platforms. Additional CCPs are expected to join once the service is live.
The initiative brings a new dimension to the post-trade processing of equity and fixed income trades, with reductions in the cost of settlement, and access to the risk mitigation features of clearing platforms. Leveraging their existing Accord connection, a broker dealer now has the ability to specify which CCP they want to clear their matched trades. SWIFT will use its network to send a MT 518 trade confirmation message to communicate these details to the CCP. The CCP will accept or reject using the MT 509 trade status message, and Accord would send status updates to inform the brokers on the progress of their trades.
Marco Strimer, CEO of SIX x-clear said: "This new service from SWIFT is a great move and will have a positive impact on the financial community. Offering market participants a choice of CCPs is an excellent decision by SWIFT and one that will ultimately reduce counterparty risk, open up new opportunities and reduce costs. We are very pleased to be a first mover of this new service and look forward to working closely with SWIFT."
Diana Chan, CEO of EuroCCP said, "EuroCCP is focused on expanding the reach of its low-cost, secure clearing services in the European marketplace. We are excited that through this innovative connection with SWIFT, prime and executing brokers can now benefit from risk mitigation, operational efficiency and trade guarantees for their off-exchange equity transactions."
Wayne Eagle, director of equities, LCH.Clearnet Ltd, concluded: "This is an important industry development which will further facilitate OTC Equity clearing. We are delighted to add SWIFT Accord for Securities to our market leading range of OTC clearing services."
Concurrently, SWIFT has agreed to work with several prime and executing brokers including BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, and UBS to work in developing the service as well as testing or piloting the new link. Testing with the CCPs is expected to start in Q1 2011 with a pilot program for the brokers planned for Q2 2011.
"This initiative will transform Accord for Securities into an industry infrastructure that enables centralised settlement flows and will significantly reduce costs and risks," added Alain Raes, Chief Executive, EMEA at SWIFT. "We are delighted to already have EuroCCP, SIX x-clear and LCH.Clearnet Ltd on-board and are keen to bring on additional CCPs in the future to give our customers the widest possible choice of CCPs they want to reach over SWIFT."
Launched in May 2009, Accord for Securities, was developed to meet the requirements of a group of major prime and executing brokers for central matching of securities trades originating from hedge funds. Today, Accord for Securities, which matches trade and settlement information using the widely-adopted MT 515 trade confirmation message, can be used not only for automated trade-date matching between prime and executing brokers for hedge fund trades, but also for matching between executing brokers for over-the-counter securities trades. In the past year, SWIFT has matched more than 1.8 million MT 515 trade confirmations using Accord for Securities.
In May 2010, the same MT 515 trade confirmation message as sent to Accord received a "no-action" relief status from the U.S. Securities and Exchange Commission (SEC). The "no-action" relief provides broker-dealers in the U.S. market with the confidence that the SWIFT electronic trade confirmation message can be used as an alternative to paper or fax to comply with SEC Rule 10b-10, which requires broker-dealers to include certain information about a trade when sending confirmations to buy-side counterparties.
The initiative brings a new dimension to the post-trade processing of equity and fixed income trades, with reductions in the cost of settlement, and access to the risk mitigation features of clearing platforms. Leveraging their existing Accord connection, a broker dealer now has the ability to specify which CCP they want to clear their matched trades. SWIFT will use its network to send a MT 518 trade confirmation message to communicate these details to the CCP. The CCP will accept or reject using the MT 509 trade status message, and Accord would send status updates to inform the brokers on the progress of their trades.
Marco Strimer, CEO of SIX x-clear said: "This new service from SWIFT is a great move and will have a positive impact on the financial community. Offering market participants a choice of CCPs is an excellent decision by SWIFT and one that will ultimately reduce counterparty risk, open up new opportunities and reduce costs. We are very pleased to be a first mover of this new service and look forward to working closely with SWIFT."
Diana Chan, CEO of EuroCCP said, "EuroCCP is focused on expanding the reach of its low-cost, secure clearing services in the European marketplace. We are excited that through this innovative connection with SWIFT, prime and executing brokers can now benefit from risk mitigation, operational efficiency and trade guarantees for their off-exchange equity transactions."
Wayne Eagle, director of equities, LCH.Clearnet Ltd, concluded: "This is an important industry development which will further facilitate OTC Equity clearing. We are delighted to add SWIFT Accord for Securities to our market leading range of OTC clearing services."
Concurrently, SWIFT has agreed to work with several prime and executing brokers including BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, and UBS to work in developing the service as well as testing or piloting the new link. Testing with the CCPs is expected to start in Q1 2011 with a pilot program for the brokers planned for Q2 2011.
"This initiative will transform Accord for Securities into an industry infrastructure that enables centralised settlement flows and will significantly reduce costs and risks," added Alain Raes, Chief Executive, EMEA at SWIFT. "We are delighted to already have EuroCCP, SIX x-clear and LCH.Clearnet Ltd on-board and are keen to bring on additional CCPs in the future to give our customers the widest possible choice of CCPs they want to reach over SWIFT."
Launched in May 2009, Accord for Securities, was developed to meet the requirements of a group of major prime and executing brokers for central matching of securities trades originating from hedge funds. Today, Accord for Securities, which matches trade and settlement information using the widely-adopted MT 515 trade confirmation message, can be used not only for automated trade-date matching between prime and executing brokers for hedge fund trades, but also for matching between executing brokers for over-the-counter securities trades. In the past year, SWIFT has matched more than 1.8 million MT 515 trade confirmations using Accord for Securities.
In May 2010, the same MT 515 trade confirmation message as sent to Accord received a "no-action" relief status from the U.S. Securities and Exchange Commission (SEC). The "no-action" relief provides broker-dealers in the U.S. market with the confidence that the SWIFT electronic trade confirmation message can be used as an alternative to paper or fax to comply with SEC Rule 10b-10, which requires broker-dealers to include certain information about a trade when sending confirmations to buy-side counterparties.
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