T-Zero, Omgeo Respond to Call for Better Derivatives Processing

Derivatives and the way they're handled have been under the glare of the spotlight ever since the Fed's intervention in the Bear Stearns crisis, which was largely precipitated by the firm's highly leveraged credit derivatives positions. "These [over-the-counter derivatives] markets have grown tremendously; but the infrastructure has not kept up — and it must," said Treasury Secretary Paulson in mid-March. Last week, 18 major Wall Street players and three organizations (ISDA, MFA and SIFMA) sent a letter to Timothy Geithner, president of the Federal Reserve Bank of New York, in which they vowed to continue to automate credit and equity derivatives processing, including making consistent use of electronic confirmation platforms and submitting novation requests (replacing one obligation with another or replacing a party to an agreement with a new party) via electronic platforms rather than by email.

We knew it would only be a matter of time before derivatives processing platform vendors would come out with upgrades to meet these requirements So far, we've seen announcements from T-Zero and Omgeo for automating novations and repurchase agreements.

T-Zero addressed the novations requirement by rolling out Novations+ processing for its credit derivative affirmation platform. The new technology integrates with the DTCC's Trade Warehouse and enables buy-side and sell-side firms to submit novation requests electronically rather than by email, even for blocks of trades. T-Zero says it has more than 180 users who are buy-side firms, dealers and prime brokers.

Omgeo's announcement yesterday focused on repurchase agreements. The company announced that its customers can now process repurchase agreements and reverse purchase agreements through its TradeSuite platform, alongside U.S. equity and fixed income products through its Oasys TradeMatch trade confirmation service. Omgeo says the addition of repo functionality in TradeSuite is part of release 7.0, which gives trade counterparties the tools to enhance internal workflows and limit the use of paper in post-trade processing.

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Publish Date: 03 April, 2008